costacctg13e_ppt_ch21

costacctg13e_ppt_ch21 - CHAPTER 21 CHAPTER 21 Capital...

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Unformatted text preview: CHAPTER 21 CHAPTER 21 Capital Budgeting and Cost Analysis Two Dimension of Cost Analysis Project-by-Project Dimension: one project spans multiple accounting periods Period-by-Period Dimension: one period contains multiple projects Project and Time Dimensions of Capital Budgeting Illustrated Capital Budgeting Capital Budgeting is making a long-run planning decisions for investing in projects Capital Budgeting is a decision- making and control tool that spans multiple years Six Stages in Capital Budgeting Identification Stage – determine which types of capital investments are necessary to accomplish organizational objectives and strategies Search Stage – Explore alternative capital investments that will achieve organization objectives Six Stages in Capital Budgeting: Continued Information-Acquisition Stage – consider the expected costs and benefits of alternative capital investments Selection Stage – choose projects for implementation Financing Stage – obtain project financing Implementation and Control Stage – get projects under way and monitor their performance Four Capital Budgeting Methods Net Present Value (NPV) Internal Rate of Return (IRR) Payback Period Accrual Accounting Rate of Return (AARR) Discounted Cash Flows Discounted Cash Flow (DCF) Methods measure all expected future cash inflows and outflows of a project as if they occurred at a single point in time The key feature of DCF methods is the time value of money (interest), meaning that a dollar received today is worth more than a dollar received in the future Discounted Cash Flows (continued)...
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This note was uploaded on 02/23/2010 for the course ACCT 81802 taught by Professor Ognibene during the Fall '09 term at CSU San Bernardino.

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costacctg13e_ppt_ch21 - CHAPTER 21 CHAPTER 21 Capital...

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