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How do we define and measure risks in financial projects?

What are examples of uses for sensitivity analysis and what-if scenarios? Any examples from your work experience or research?

How do we define fixed and variable costs?

Give examples of the different types of costs in various applications from your experience or research.

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Bunny Greenfelder
Bunny GreenfelderLv2
29 Sep 2019
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During week 6 we develop the theory and application of capital budget analysis. The theory was robust, the calculations mathematically and logically defined, and many of the real-world problems, likely to be encountered, were addressed. As capital budgeting essentially re-invents the company through major long-term expenditures it is arguably one of the most critical functions that financial management performs. However, based on my personal experiences, extensive empirical data, and antidotal data - many firms routinely experience significant failures in their selection of capital projects.

Briefly review either your personal experiences and/or the financial literature to identify and present a description of one actual capital project/product failure and the reasons attributed to the failure. For those of you who do not have personal experiences the following are some illustrated examples of failed projects/products over the last 50 years you may want to look up and consider: -New Coke,- The Iridium Satellite Communication,- the Edsel automobile, Beta (vs. VHS), the Concord SST, and various Dot Coms. Feel free to research others.

Synthesize your one-paragraph position on what 3-5 specific factors you believe most likely to contribute to capital project analysis failure.

You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor.

During week 6, we develop the theory and application of capital budget analysis. The theory was robust, the calculations mathematically and logically defined, and many of the real-world problems, likely to be encountered, were addressed. As capital budgeting essentially re-invents the company through major long-term expenditures it is arguably one of the most critical functions that financial management performs. However, many firms routinely experience significant failures in their selection of capital projects.

The assignment for this topic consists of two parts:

1) For your first topic in this conference I would like you to briefly review either your personal experiences and/or the financial literature to identify and present a description of one actual capital project/product failure and the reasons attributed to the failure. For those of you who do not have personal experiences the following are some illustrated examples of failed projects/products over the last 50 years you may want to look up and consider: -New Coke,-The Iridium Satellite Communication,-the Edsel automobile, -Beta (vs. VHS), -the Concord SST, and various dotcoms. Feel free to research others.

In your response please provide financial information regarding the project (whatever is available), i.e. initial outlay, projected cash flows, final dollar losses, etc.

Remember this is a one to two paragraph exercise - do not go overboard - a few hours research and summation is all that’s required. I am interested only in your short, concise description of the project and the major reasons you believe it failed.

2) Your "Takeaway": Synthesize your one-paragraph position on what specific factors you believe most likely to contribute to capital project analysis failure.

During week 6 we develop the theory and application of capital budget analysis. The theory was robust, the calculations mathematically and logically defined, and many of the real-world problems, likely to be encountered, were addressed. As capital budgeting essentially re-invents the company through major long-term expenditures it is arguably one of the most critical functions that financial management performs. However, based on my personal experiences, extensive empirical data, and antidotal data - many firms routinely experience significant failures in their selection of capital projects.

The assignment for this topic consists if two parts:

1) For your first topic in this conference I would like for you to briefly review either your personal experiences and/or the financial literature to identify and present a description of one actual capital project/product failure and the reasons attributed to the failure. For those of you who do not have personal experiences the following are some illustrated examples of failed projects/products over the last 50 years you may want to look up and consider: -New Coke,- The Iridium Satellite Communication,- the Edsel automobile, Beta (vs. VHS), the Concord SST, and various Dot Coms. Feel free to research others.

In your response please provide financial information regarding the project (what is available): initial outlay, projected cash flows, final dollar losses.

Remember this is a one to two paragraph exercise - do not go overboard - a few hours research and summation is all that’s required. I am interested only in your short, concise description of the project and the major reasons you believe it failed.

2) Synthesize your one-paragraph position on what 3-5 specific factors you believe most likely to contribute to capital project analysis failure.

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