{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 9. Cap budgeting - Strategy and analysis

Chapter 9. Cap budgeting - Strategy and analysis - Capital...

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Capital Budgeting - Strategy and Analysis Chapter 9 Finance 357
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Cash Flow Uncertainty In the problems to this point, cash flows have been certain. Tables of cash flows told you when the cash flow would come and how much it would be. Not very similar to life in the real world. In the real world, cash flows aren’t always certain and decision makes much take the uncertainty into account. We must have some tools to deal with the uncertainty.
Image of page 2
Decision Trees Decision Trees are used to sort through the variety of decisions that are usually involved with NPV project analysis.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Sensitivity Analysis Many times during project planning, NPV values are calculated down to the dollar for each year, but in reality, projects rarely reach the planned numbers. A tool is needed to give managers a way to determine how closely actual numbers will be to the planned numbers. Sensitivity Analysis examines how sensitive a particular NPV calculation is to changes in the underlying assumptions of the project.
Image of page 4
Using Sensitivity Analysis We work for a jet engine manufacturer who is projecting that it will sell 3,000 plane engines next year. We must decide if this is a reasonable sales estimate.
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern