Chapter 9 - Principles of Finance FIN 3100 Chapter 9...

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Unformatted text preview: Principles of Finance FIN 3100 Chapter 9 Capital Budgeting Decision Models 1 Patty Robertson May not be used without permission Agenda In this chapter, we move from outside the company to inside. In Chapter 1, capital budgeting was defined as determining which long-term investments the firm should select to enhance firm value. With an infinite list of possible asset investments, but limited resources, how do firms evaluate and compare options? Discuss the available tools and techniques. 2 Abbreviations 3 Capital Budgeting A firm makes capital budgeting (or asset investment ) decisions by deciding how to spend money investing in projects that enhance firm value. 4 Assets $1,000 Debt $400 Equity $600 Total Assets $1,000 Total Debt & Equity $1,000 Balance Sheet WSJ Headlines Volvo's Big China Gamble Cigna Travels Abroad For Its Financial Health Apple Takes i-Pad to China Chrysler Dealers to Get Peek at Coming Models Wal-Mart to Offer Cell Phone with No Contract For Intel, New Chips Equal New Strategy Japan's Mitsui Forges Beijing Venture China Air to Join SkyTeam Alliance Phillips Targets Emerging Markets Chevron Bets Big on U.S. Natural Gas Sara Lee to Sell Bakery Unit Barnes and Noble Adds Toys Chrysler Tries Makeover on Ugly Duckling GE to Buy Electric Vehicles Wal-Mart to Ship Some Orders Free Penney Tries to Carve New Niches 5 Capital Budgeting Capital budgeting involves long-term decision- making for long time horizons and large sums of money. Capital budgeting uses specific criteria to decide which fixed assets to purchase, what products to make or sell, and what markets to enter....
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Chapter 9 - Principles of Finance FIN 3100 Chapter 9...

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