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[Type text]Course Topics
2Course TopicsOverviewCapital budgeting is belonging to the main function in financial management.Capital budgetingexplains investment decision making, most important process for corporate finance. Capitalbudgeting determine the task whether to undertake an investment or not. Investment involvescompany’s long term investment. Firm performance reflects the success or failure. This coursefocuses on managing firm’s financial suggestion.The aim of following course is to evaluate which project is beneficial for the long terminvestment and set out the firm’s future cash flows and also help in risk understanding. Themajor strength of this course is its techniques applying on project of real companies, used on adaily basis. The core content of this course focus on the examples, the application of methodsand also tried to mention cash flow analysis that allows those methods to provide practicalaspect. After two to three section quiz helps to examine the course examples. Important topics,examples, formulas are given throughout the techniques evaluation.This course will study the different methods Net Present Value, Internal Rate of Return andPayback Period. Assets involved in business define company’s management. For example, asoap company’s a soap company because it runs through soap manufacturing appliances. Theinvestment making is an important task than other financial decisions, where to raise fund fromloan financing or how to deal with working capital.Apart from survival correct decision making and company’s success is also important forcompany’s growth and competitiveness based on continuous new product ideas, outputproductivity at low cost and existing product to perform better.
3Course TopicsConsidering the standards, capital budgeting standard set out the criteria to calculate Net PresentValue and Internal Rate of Return, most widely rules for decision. The covered topics examinehow to make cash flow analysis, discounted factor application and estimated projects. Afterknowing the application of different methods like payback period, account rate of return, NetPresent Value and Internal rate of return the next motive is to cover the evaluation of estimatedprojects. Each topic given in this course examined the examples for proper understanding. Afterevery two or three section quiz section inserted ends with an interpretation that highlights the keytopics from the course.IntroductionCapital budgeting emphasizes the planning of major project for the company’s long terminvestment. Investment involves company’s long term investment strategy, machineryreplacement, new product, new capital assets, projects regarding research and development.Capital budgeting is also called as investment appraisal. Allocation of capital to several projectsinvolves planning and funding of cash. Intention behind every investment budgeting strategy isto facilitate higher return.To understand every stage organization need to go through them whether it is of decision makingknowledge, position establishment by using option pricing analysis and also discounted cashflow analysis. Usually different approaches compared the projects performance and one of thenon- discount methods are accounting rate of return and payback analysis.Ranking projects is also the task execute through capital budgeting where large amount ofinvestment proposal takes in consideration. The purpose is to serve the budgeting to ensure
4Course Topicscapital expenditures and revenues. A framework of this particular model analyzes theperformance of business and plans according to forecasting measure. To carry actual operation incapital budgeting manager considers the following conditions arise in an event.Decision makingUncertainty is the main reason in modern world decision making strategy. Proposed capitalprojects with management can take overall decisions and count the possible outcomes of existingmarket circulation. Decision tree implementation ensure that using different software’s likeexpert choice and decision pro to gain knowledge regarding decision. Decision tree providedtrade included private trade building to help. Different opinions and ideas, group and teamexecution are much better due to decision tree.Option pricingUncertainty is an important factor while considering option pricing also. First stage provideknowledge through decision tree whereas second stage ascertain the option offered by customerswhere producing company have options to change according to suitable option for the project togo through. Options can be taken in various ways: postponement, alteration, changes etc. How torecognize the project with the options values organization need to manage capital projects.Financial management in accounting studies the present values of assets. Inflation is main causeto reduce the cost of asset over the useful life. Future perspective involves uncertainty and sunkcost of money recognized the respective time value of money.
5Course TopicsDiscounted rate of returnconsists of net present value, IRR and profitability index. The keyelement decision making usually examine these method. The entire company goes through thepurpose only to generate profitability. Operating expenses involves in every sales and to increasethe performance in order to profitability. Profit throughout the whole system obligated to pay thisoperating expenses. The primary component of capital budgeting is making proposal in order tomaximize the growth for through put to operate favorably. Cost reduction is less important.Payback analysis decisions determined time period and revenue generation.Cash flows determination after tax consider in capital budgeting. Some risk involvements are inits adjustment. After considering decision tree knowledge for decision is making and also optionsbuilding for company’s projects. Different factors comprised its scope are as:1)Compensate the risk engagement in projects2)Acknowledge the risk for foreign projects.3)Adjustment in capital budgeting for expected results.Economic life of planning projects can evaluate through stages of capital budgeting whereascalculation is another level to examine capital projects.DepreciationAssets including capital assets are associated with depreciation, estimated life of an asset helps tocalculate the depreciable value of asset. Depreciation is a non-cash item in cash flow statement.Application of depreciation deducted to measure taxes on project revenues payment and alsoadded depreciation to bring cash flow.Working Capital
6Course TopicsInvestment basic requirement is to increase working capital. New production consumes moreworking capital that often needs stock and salaries to pay. Change in working capital meansmainly leads to company’s project. End in project evaluation brought reverse mechanism inprojects.Overhead:Moreover planned projects involved in allocated overheads to increase proportion often. There isno difference happens with nature of allocation. For relevancy of cost there is need to access theoverhead implemented in respective project associated with more capital investment.Financing Costs:To funding a capital project financing is needed. To cover additional cash flows need to plan thecapital project in its best way double cost effect possibility eliminates due to financing costdeduction from it. Discount rates included in financing cost from our capital project.Capital budgeting decisions influenced by the different factors:Funding for the business projectsCapital criteriaInvestment and replacementGovernment interventionEconomic life criteriaEngagement of riskLocation of an organizationPredictions of market performance
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