wk5 - Week 5 Tutorial Emily Lo Capital Budgeting Process of...

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Week 5 Tutorial Emily Lo
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Capital Budgeting Process of analysing long term investment projects that will generate cash flow and deciding which projects to invest Why is it important? Capital expenditures typically require a substantial outlay of funds The capital assets selected have long term impacts on a business
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Types of projects  Replacement >> Maintenance of Existing Business (replace damaged equipment) >> Cost Reduction (replace inefficient equipment) Expansion >> Vertical (increase output of existing products) >> Horizontal (enter into new product area) >> Mandatory investments to ensure compliance >> Riskiness = 0 Other Projects >> Projects that do no fall under the above classifications >>e.g. infrastructure developments
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Evaluating Options Capital Budgeting with one project >> accept or reject Capital Budgeting with Multiple Projects >> Independent no impact on each other’s cash flows >> Mutually exclusive
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This note was uploaded on 01/09/2012 for the course FINS 1613 taught by Professor Drkhshim during the Three '10 term at University of New South Wales.

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wk5 - Week 5 Tutorial Emily Lo Capital Budgeting Process of...

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