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Old 12th March 2016, 04:11 PM
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Default Re: Capital budgeting PPT MBA

Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants.

Points of making PPT on Capital budgeting

Capital Budgeting


1. Investment decision making process, which involves fixed assets.

Capital
Capital budget

2. Long-term decisions
Sizable cash outlays
Difficult to reverse

3. Important to firm’s future
Profitability
Growth and Survival
Future direction

The Five Stages of Capital Budgeting

Stage 1: Investment screening and selection

Stage 2: Capital budgeting proposal

Stage 3: Budget approval and authorization

Stage 4: Project tracking

Stage 5: Post completion audit

Steps

Estimate the CFs (inflows & outflows).

Assess the riskiness of the CFs.

Determine the appropriate discount rate, k = WACC for project.
Find NPV and/or IRR

Accept if NPV > 0 and/or IRR > WACC.

Investment Evaluation Techniques

Payback Period (PB)

Discounted Payback

Profitability Index (PI)

Internal Rate of Return (IRR)

Modified Internal Rate of Return (MIRR)
Attached Files
File Type: zip PPT on Capital budgeting.zip (44.1 KB, 60 views)
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