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Argosy UniversityB6021 - Marketing Planning and Strategy Terry N. CeramiM4:A2 – Apply Decision-Making SkillsJuly 5, 2017Suzanne Werden
AGENDAPayback Method2Internal Rate of Return (IRR)3Techniques / Principles of Capital Budgeting 1Net Present Value (NPV)4Old or New Equipment Analysis5Total Cost Approach6Data Analysis7
Techniques / Principles of Capital Budgeting “Every decision involves a choice between at least two alternatives.Only those costs and benefits that differ between alternatives are relevant in a decision. All other costs and benefits can and should be ignored as irrelevant. Using the capital budgeting techniques we help us make sound decisions.”(Galbreath, 2014)CAPITAL BUDGETING TECHNIQUESPRINCIPLES OF CAPITAL BUDGETINGAny decision that involves a cash outlay now in order to obtain a future return is a capital budgeting decision. typical capital budgeting decisions include:•Cost reduction decisions. should new equipment be purchased to reduce costs?•Expansion decisions. should a new plant, warehouse, or other facility be acquired to increase capacity and sales?•Equipment selection decisions. which of several available machines should be purchased?•Lease or buy decisions. should new equipment be leased or purchased?•Equipment replacement decisions. should old equipment be replaced now or later?Payback MethodInternal Rate of Return MethodNet Present Value