Chapter 13 Capital Budgeting Techniques 13-1
13-1 Chapter 13 Capital Budgeting Techniques
Capital Budgeting Techniques a Project Evaluation and Selection n Potential difficulties n Capital Rationing n Project Monitoring n Post-Completion Audit 13-2
13-2 Capital Budgeting Techniques Project Evaluation and Selection Potential Difficulties Capital Rationing Project Monitoring Post-Completion Audit
Project Evaluation: Alternative ethods n Payback Period(PBP) n Internal Rate of Return ( IRR) n Net Present Value(NPV) n Profitability Index(PI) 13-3
13-3 Project Evaluation: Alternative Methods Payback Period (PBP) Internal Rate of Return (IRR) Net Present Value (NPV) Profitability Index (PI)
Proposed Project Data Julie Miller is evaluating a new project for her firm Basket Wonders( Bw She has determined that the after -tax cash flows for the project will be $10,000,$12,000,$15,000,$10,000, and $7,000 respectively for each of the Years 1 through 5. The initial cash outlay will be $40,000 13-4
13-4 Proposed Project Data Julie Miller is evaluating a new project for her firm Basket Wonders (BW). She has determined that the after-tax cash flows for the project will be $10,000, $12,000, $15,000, $10,000, and $7,000 respectively for each of the Years 1 through 5. The initial cash outlay will be $40,000
Independent Project For this project, assume that it is independent of any other potential projects that Basket Wonders may undertake o Independent -A project whose acceptance(or rejection does not prevent the acceptance of other projects under consideration 13-5
13-5 Independent Project Independent -- A project whose acceptance (or rejection) does not prevent the acceptance of other projects under consideration. For this project, assume that it is independent of any other potential projects that Basket Wonders may undertake