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Review and analysis and decision making steps 2 and 3

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Unformatted text preview: Each step in the process is important. Review and analysis and decision making (Steps 2 and 3) consume the majority of time and effort, however. Follow-up (Step 5) is an important but often ignored step aimed at allowing the firm to improve the accuracy of its cash flow estimates continuously. Because of their fundamental importance, this and the following chapters give primary consideration to review and analysis and to decision making. Basic Terminology Before we develop the concepts, techniques, and practices related to the capital budgeting process, we need to explain some basic terminology. In addition, we will present some key assumptions that are used to simplify the discussion in the remainder of this chapter and in Chapters 9 and 10. 358 PART 3 Long-Term Investment Decisions FOCUS ON e-FINANCE Information Technology’s Big Byte Information technology (IT) is one of a company’s largest capital expense categories. In the rapidly changing IT environment, managers clamor for the latest hardware and software upgrades to keep IT systems current...
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