TAILIEUCHUNG - Financial Management - Chapter 10

Capital Budgeting: the process of planning for purchases of long-term assets. Our firm must decide whether to purchase a new plastic molding machine for $127,000. How do we decide? Will the machine be profitable? Will our firm earn a high rate of return on the investment? The relevant project information follows: | Chapter 10: Cash Flows and Other Topics in Capital Budgeting 2002, Prentice Hall, Inc. Capital Budgeting: the process of planning for purchases of long-term assets. example: Our firm must decide whether to purchase a new plastic molding machine for $127,000. How do we decide? Will the machine be profitable? Will our firm earn a high rate of return on the investment? The relevant project information follows: The cost of the new machine is $127,000. Installation will cost $20,000. $4,000 in net working capital will be needed at the time of installation. The project will increase revenues by $85,000 per year, but operating costs will increase by 35% of the revenue increase. Simplified straight line depreciation is used. Class life is 5 years, and the firm is planning to keep the project for 5 years. Salvage value at the end of year 5 will be $50,000. 14% cost of capital; 34% marginal tax rate. Capital Budgeting Steps 1) Evaluate Cash Flows Look at all incremental cash flows occurring as a result of the project. Initial outlay Differential Cash Flows over the life of the project (also referred to as annual cash flows). Terminal Cash Flows Capital Budgeting Steps 1) Evaluate Cash Flows 0 1 2 3 4 5 n 6 . . . Capital Budgeting Steps 1) Evaluate Cash Flows 0 1 2 3 4 5 n 6 . . . Initial outlay Capital Budgeting Steps 1) Evaluate Cash Flows 0 1 2 3 4 5 n 6 . . . Annual Cash Flows Initial outlay Capital Budgeting Steps 1) Evaluate Cash Flows 0 1 2 3 4 5 n 6 . . . Terminal Cash flow Annual Cash Flows Initial outlay 2) Evaluate the risk of the project. We’ll get to this in the next chapter. For now, we’ll assume that the risk of the project is the same as the risk of the overall firm. If we do this, we can use the firm’s cost of capital as the discount rate for capital investment projects. Capital Budgeting Steps 3) Accept or Reject the Project. Capital Budgeting Steps Step 1: Evaluate Cash Flows a) Initial Outlay: What is the cash flow at “time 0?” (Purchase price of the .

• Tài chính doanh nghiệp
• lectures
• financial markets
• monetary
• Business Administration
• Financial Management
• corporate finance
• Journal of technology and science education
• Academic performance of university students in practical lectures
• Class attendance of university students in practical lectures
• Seating location of university students in practical lectures
• economic theory
• political economy lectures
• economy politics
• economics books
• university documents
• slide lectures
• economics
• quantitative economics
• general
• macroeconomic
• curriculum econometric
• Improving Automatic Speech Recognition for Lectures
• Transformation based Rules Learned
• Minimal Data
• báo cáo khoa học
• báo cáo ngôn ngữ
• xử lý ngôn ngữ tự nhiên
• geographical documents
• ancient wonders
• natural wonders
• historic sites
• coastal engineering
• geography
• oceanography
• ocean
• marine engineering
• Summary of the Doctoral thesis
• Law Doctoral thesis
• Doctoral thesis summary
• State management of lectures
• Public universities in Vietnam
• State management activities
• khoa học
• tự nhiên
• môi trường
• vũ trụ học
• Introduction to Cosmology
• TASI Lectures
• synthesis
• several
• devel
• growth
• bureaucracy
• fields
• theory
• algebraic
• providing
• elementary
• probability
• measure
• Fundamental
• NTRU encryption algorithm
• Digital signature scheme
• Lectures on the NTRU encryption algorithm
• The NTRU encryption algorithm
• Some basic NTRU security issues
• Lectures Computer architecture
• Computer architecture
• Computer Abstractions and Technology
• Instructions Language of the Computer
• Arithmetic for Computers
• Below your program
• Under the covers
• Centra processor unit
• Language of the computer
• Operands of the computer hardware
• Signed and unsigned number
• Representing instructions in the computer
• Addition and subtraction
• Parallelism and computer arithmetic
• Floating point
• Logic design convention
• Building a datapath
• Asimple implementation scheme
• Pipelined datapath and control
• Basic communication skills
• Lectures Basic communication skills
• Communicate for the first meet
• Ineffective communication
• Speaking styles
• listening skills
• Writing skills open
• Lectures Four basic steps in essay writing
• Practice writing in English
• Support the thesis with specific evidence
• Organizethe specific evidence
• Connect the specific evidence
• Learning English