Capital_Budgeting

Capital_Budgeting - Capital Budgeting (Long Term...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Capital Budgeting (Long Term Investment) Decisions Chap.12 Dr. Kiani A. What is capital budgeting ? Capital budgeting is the series of long term planning decisions by individual economic units as to how much and where resources will obtained and expended for future use , particularly in the production of future goods and services. B. The scope of capital budgeting encompasses : 1. How money is acquired and from what sources? Sources are: a. Internal= Retained earnings and depreciation b. External= Issue bonds, debt financing, issue stocks(common & preferred) 2. How individual capital project alternatives are identified and evaluated? 3. How minimum requirements of acceptability are set? ---- cost of capital ------ weighted average cost of capital Sources % Specific cost of Capital WACOC RE $3,000,000 .3 .10 .030 DEBT 2,000,000 .20 .15 .030 C/S 4,000,000 .40 .09 .036 P/S 1,000,000 .10 .08 .008 ---------------------------------------------------------------------------------------- 10,000,000 1.00 10.40% ====================================================== 4. How final project selections are made? 5.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Capital_Budgeting - Capital Budgeting (Long Term...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online