MGAB03H3 Lecture Notes - Lecture 12: Capital Budgeting, Net Present Value, Decision Points
Document Summary
After studying this chapter, you should be able to: define capital budgeting and the six stages of capital budgeting, evaluate the acceptability of an investment project using the following methods: Slide # 2: the concept of relevance is important for this type of decision making. Capital budgeting tends to fall into two broad categories: Attempt to rank acceptable alternatives from the most to least appealing. Slide # 3: different application of capital budgeting decision, notice these decisions are long term in nature, unlike chapter. 4, which are more short term focus: capital budgeting is used for screening and preference decisions. Identify potential investments that will achieve corporate objectives: explore investment alternatives, consider costs and benefits (qualitative and quantitative factors) of each alternative, choose projects for implementation using various methods such as npv, irr, payback, arr, obtain necessary funding, put project in motion and monitor performance, different companies have different # of steps.
