Return, risk, and the security market line part six. Making capital investment decisions, part ii faculty of business administration lakehead university spring 2003 may 21, 2003 outline 10. A firms business involves capital investments capital budgeting. Depreciation is a noncash expense, but it is taxdeductible on the income statement. Sunk costs have already been incurred, so they are irrelevant. Chapter 10 making capital investment decisions stardoes is considering expanding its chilled cappacino business to college vending machines. Chapter 10 making investment decisions solutions concept questions. Chapter 10 making capital investment decisions 2633. When making capital investment decisions, we must convert cash. Net present value and other investment criteria chapter 10. Thus depreciation causes taxes paid, an actual cash outflow, to be reduced. The analysis of capital investment decisions is a major topic in corporate finance courses, so we do not discuss these issues and. The difference between a firms future cash flows if it accepts a project and the firms future cash flows if it does not accept the project is. There are a number of factors that management must consider when making capital investment decisions, such as.
Fin 311 chapter 9 handout page 1 chapter 9 making capital investment decisions introduction the cash flows that should be included in a capital budgeting analysis are those that will only occur if the project is accepted. Chapter 10 making capital investment decisions finance and general business 3500 with rt at university of missouri st. Ch 10 making capital investment decisions free download as powerpoint presentation. Chapter 10 making capital investment decisions extra. Ppt chapter 10 making capital investment decisions. The basic task for investment decisionmaking then will be to ascertain whether the future benefits from the investment will make the initial outlay worthwhile. It follows a concrete path incorporating and using financial techniques and financial instruments that help in decision making. How well an investment fits into the longterm strategy of the business. Solutions manual for fundamentals of corporate finance 9th. An understanding of the importance of capital budgeting in marketing decision making. In particular, 6 alternative evaluations techniques are covered including the payback period, the discounted payback period, the net present. The difference between a firms future cash flows if it accepts a project and the firms future cash flows if it does not accept the project is referred to as the projects. Chapter 7 making capital investment decisions answers to concepts.
Fine 2000 chapter 10 making capital investment decisions. The analysis of capital investment decisions is a major topic in. The drinks would be produced in an unused adjacent building. Study 12 chapter 10 making capital investment decisions flashcards from danette p. Chapter 10 making capital investment decisions finance. Fundamentals of corporate finance ross, westerfield, jordan chapter 10. Financial analysis for todays investment projects by h. Study 21 chapter 10making capital investment decisions flashcards from anhthu h. Chapter 10 making capital investment decisions chapter. Introduction to corporate finance with greg pierce textbook.
Chapter 10 making capital investment decisions flashcards. The recovery of the nwc occurs in year 5, along with the aftertax salvage value. Judgment in managerial decision making, 7th edition. This chapter gives you a good start in learning to do this. Answers to discussion questions wiley online library. You will recall that in chapter 1 we adopted the view that, broadly, firms seek to maximize the. Chapter 10 making capital investment decisions studyblue. Capital budgeting, decision making processes, discounted cash flow techniques, valuation. The psychology of poor investment decisions 8 active trading 145 action steps 147 chapter 9 making rational decisions in negotiations151 a decision analytic approach to negotiations 152 claiming value in negotiation 155 creating value in negotiation 156 the tools of value creation 161 summary and critique 166 chapter 10 negotiator cognition 168.
Chapter 9 making capital investment decisions solutions to questions and problems 1. Chapter 10making capital investment decisions finance 300 with laplante at university of wisconsin madison studyblue. Chapter 010 making capital investment decisions 10 9 23. Estimating cash flows on capital budgeting projects. The npv of an investment is the difference between its market value and its cost. Study 19 chapter 10 making capital investment decisions flashcards from mark m. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Start studying chapter 10 making capital investment decisions. Chapter 6 making capital investment decisions solutions to evennumbered problems and cases 6. If you continue browsing the site, you agree to the use of cookies on this website.
Chapter 10 making capital investment decisions multiple choice questions 1. An overview capital investment decisions are the responsibility of managers of investment centers see chapter 12. Making capital investment decisions chapter ten 111 key concepts and skills understand how to determine. The analysis of capital investment decisions is a major topic in corporate finance courses, so we do not discuss these issues and methods here in any detail. The equivalent annual cost method tvm we need to evaluate a new project using the tvm technique. According to the cash flow oriented perspective an investment project can be characterised by a stream of cash flows starting with an initial investment outlay a cash outflow. Making capital investment decision from finan 200 at waikato university. Capital investment decisions involve the judgments made by a management team in regard to how funds will be spent to procure capital assets. The npv rule is to take a project if its npv is positive. The changes in a firms future cash flows that are a direct consequence of.
Making capital investment decisions faculty of business administration lakehead university spring 2003 may 21, 2003 outline 10. Thus, it examines whether a new investment will benefit or not the company, and concludes with a final recommendation as well as the rationale, formed through the whole application process. Making capital investment decisions capital budgeting concepts relevant cash flows incremental cash flows after tax effects have been considered. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. Stardoes owns the building, which is fully depreciated. Chapter 10 making capital investment decisions answer key multiple choice questions 1. Ch 10 making capital investment decisions depreciation.
Making capital investment decisions corporate finance ross, westerfield, and jaffe outline 1. Typical investment decisions include the decision to build another grain silo. Decisions on investment, which take time to mature, have to be based on the returns which that investment will make. This course examines important issues in corporate finance from the perspective of financial managers who are responsible for making significant investment and financing decisions. The relevant cost is what the asset or input is actually worth today, not. Examples are given for both notforprofit and forprofit organizations.
Corporate finance and business journalnewspaper article 1123 words 5 pages. Chapter 10 making capital investment decisions essay. In this chapter, the author explains the various capital budgeting techniques that can be used to make informed investment decisions involving productive assets such as plant and equipment, machinery, etc. Chapter 10making capital investment decisions finance. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. Chapter 9 making capital investment decisions slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Ch 10 making capital investment decisions depreciation book. Capital budgeting and investment decisions springerlink. Chapter seven builds on this concept, incorporating it into the investment decision by presenting several techniques for analyzing investment decisions. Unless the project is for social reasons only, if the investment is unprofitable in the long run, it is unwise to invest in it now. The standalone principle each project can be evaluated in isolation. In the context of capital budgeting, what is an opportunity cost. Chapter 10 making capital investment decisions extra practice luke mcelfresh.