Ch14 Capital Budgeting.ppt - Cost Accounting Foundations...

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Chapter 14 Capital Budgeting Cost Accounting Foundations and Evolutions Kinney, Prather, Raiborn
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Learning Objectives (1 of 3) Explain why most capital budgeting methods focus on cash flows Compute and describe what is measured by the payback period Explain how the net present value and profitability index of a project are measured Compute the internal rate of return and explain what it measures
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Learning Objectives (2 of 3) Describe how taxation and depreciation methods affect cash flows Explain the assumptions and limitations of the various capital project evaluation methods Explain how managers rank investment projects Clarify how risk is considered in capital budgeting analyses
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Learning Objectives (3 of 3) Explain a postinvestment audit of a capital project (Appendix 1) Calculate present values (Appendix 2) List the advantages and disadvantages of the accounting rate of return
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Capital Budgeting Capital budgeting is the process for evaluating proposed long-range projects or courses of future activity for the purpose of allocating limited resources Plan and prepare the capital budget Review past investments to assess and enhance the decision process
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Capital Budgeting Compare and evaluate alternative projects financial and nonfinancial criteria short and long-term benefits fit with existing technology effect on marketing and cost management
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