Hansson Private Label, Inc. Business Case Questions.docx

Hansson Private Label, Inc. Business Case Questions.docx -...

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Week #1 Discussion Questions: In capital budgeting, the financial manager identifies investment opportunities that are worth more to the company than they cost to acquire. For the company you selected for your business plan: What process do you use to evaluate capital investment decisions? The process used to evaluate capital investment decisions is called capital budgeting. This planning process starts with identifying potential investment opportunities, estimating those investment, operation and implementation costs, estimating the cash flow or benefit, assessing any risks involved and making an educated decision on your best capital investment option (“The 5 Steps to Capital Budgeting,”n.d.). What capital budgeting methods do you use (e.g. payback period, IRR, NPV)? There are, essentially, six methods of capital budgeting decision criteria. The six capital budgeting methods are Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), Profitability Index (PI), payback and discounted payback. While most firms would proceed with using only one or two of these methods, all are calculations are performed on computers, so the value of each lies in what your particular business is looking to achieve. Each method will give a slightly different insight into a go/no-go decision (Ehrhardt et al., 2017).
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