# im_ch12 - CHAPTER 12 Planning for Capital Investments...

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CHAPTER 12 Planning for Capital Investments ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Discuss the capital budgeting evaluation pro- cess, and explain what in- puts are used in capital budgeting. 1 2. Describe the cash payback technique. 2, 3 1 1, 2, 7, 8 1A, 2A 1B, 2B 3. Explain the net present value method. 4, 5, 6, 7 2, 3, 4, 5 1, 2, 3, 8 1A, 2A, 3A, 4A, 5A 1B, 2B, 3B, 4B, 5B 4. Identify the challenges presented by intangible benefits in capital budgeting. 8, 9 4 4A 4B 5. Describe the profitability index. 10 5 3 3A 3B 6. Indicate the benefits of performing a post-audit. 11 6 7. Explain the internal rate of return method. 12, 13, 16 7, 8 4, 5 3A, 5A 3B, 5B 8. Describe the annual rate of return method. 3, 14, 15 9 6, 7, 8 1A, 2A 1B, 2B 12-1

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ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Compute annual rate of return, cash payback, and net present value. Moderate 30 - 40 2A Compute annual rate of return, cash payback, and net present value. Complex 30 - 40 3A Compute net present value, profitability index, and internal rate of return. Moderate 20 - 30 4A Compute net present value considering intangible benefits. Moderate 20 - 30 5A Compute net present value and internal rate of return with sensitivity analysis. Moderate 30 - 40 1B Compute annual rate of return, cash payback, and net present value. Moderate 30 - 40 2B Compute annual rate of return, cash payback, and net present value. Complex 30 - 40 3B Compute net present value, profitability index, and internal rate of return. Moderate 20 - 30 4B Compute net present value considering intangible benefits. Moderate 30 - 40 5B Compute net present value and internal rate of return with sensitivity analysis. Moderate 30 - 40 12-2
BLOOM’S TAXONOMY TABLE 12-3

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STUDY OBJECTIVES 1. DISCUSS THE CAPITAL BUDGETING EVALUATION PROCESS, AND EXPLAIN WHAT INPUTS ARE USED IN CAPITAL BUDGETING. 2. DESCRIBE THE CASH PAYBACK TECHNIQUE. 3. EXPLAIN THE NET PRESENT VALUE METHOD. 4. IDENTIFY THE CHALLENGES PRESENTED BY INTANGIBLE BENEFITS IN CAPITAL BUDGETING. 5. DESCRIBE THE PROFITABILITY INDEX. 6. INDICATE THE BENEFITS OF PERFORMING A POST- AUDIT. 7. EXPLAIN THE INTERNAL RATE OF RETURN METHOD. 8. DESCRIBE THE ANNUAL RATE OF RETURN METHOD. 12-4
CHAPTER REVIEW The Capital Budgeting Evaluation Process 1. (S.O. 1) The capital budgeting evaluation process generally has the following steps: a. Project proposals are requested from departments, plants, and authorized personnel. b. Proposals are screened by a capital budget committee. c. Officers determine which projects are worthy of funding; and d. Board of directors approves capital budget. Cash Flow Information

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## This note was uploaded on 05/08/2008 for the course ACC 210 taught by Professor John during the Spring '08 term at South Central College: Faribault Campus.

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im_ch12 - CHAPTER 12 Planning for Capital Investments...

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