U4-out - LECTURE OUTLINE-FINANCE 320 UNIT 4 CAPITAL...

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LECTURE OUTLINE--FINANCE 320 UNIT 4 – CAPITAL BUDGETING Topic I: Capital Budgeting Described I. Capital Budgeting Defined II. Importance of Capital Budget III. Steps in Capital Budgeting A. Idea Generation B. Evaluation Steps 1. initial proposal 2. initial review 3. cash flow estimates and applying a decision rule 4. Project Analysis C. Getting Started D. Monitoring 1. Purpose a. Abandonment Decision b. Reducing Agency Costs i. definition ii. examples 2. Procedures a. Checking the Numbers b. Incentives IV. Types of Capital Budgeting Projects A. Types of Projects: Purpose B. Types of Projects: Interdependency 1. Independent 2. Interrelated 3. Mutually Exclusive Projects 4. Implications for Analysis Topic II: Capital Budgeting Cash Flows I. Definitions II. Initial A. Cost of Capital Outlay B. Other Expenses C. Working Capital D. Sale of Assets III. Operating A. Revenues / Costs B. Non recurring flows C. Depreciation / Tax Shield D. Opportunity Costs IV. Terminal A. Sale of Assets B. Other Costs C. Working Capital V.
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