Planning for Cap Investments课件.ppt

Homework: Planning for Cap Investments;ANNOUNCEMENTS;;略玲兰骆垂八鸯酌斥椒饱雾碌楞卫破裹将艾谐倍棺麓跺辊笆若亚羡共予祖Planning for Cap Investments课件Planning for Cap Investments课件;Corporate capital budget authorization process: Proposals for projects are requested from each department. Proposals are screened by a capital budget committee. Officers determine which projects are worthy of funding. Board of directors approves capital budget.;LO 1;Cash Flow Information;Cash Flow Information;Capital budgeting decisions depend on: Availability of funds. Relationships among proposed projects. Company’s basic decision-making approach. Risk associated with a particular project.;Illustrative Data;Cash payback technique identifies the time period required to recover the cost of the capital investment from the net annual cash inflow produced by the investment.;Shorter payback period = More attractive the investment. In the case of uneven net annual cash flows, the company determines the cash payback period when the cumulative net cash flows from the investment equal the cost of the investment. ;Shorter payback period = More attractive the investment. In the case of uneven net annual cash flows, the company determines the cash payback period when the :;;;A $100,000 investment with a zero scrap value has an 8-year life. Compute the payback period if straight-line depreciation is used and net income is determined to be $20,000. 8.00 years. 3.08 years. 5.00 years. 13.33 years.;Discounted cash flow technique: Generally recognized as the best approach. Considers both the estimated total cash inflows and the time value of money. Two methods: Net present value. Internal rate of return.;LO 3 Explain the net present value method.;LO 3;Illustration: Stewart Shipping Company’s annual cash flows are $24,000. If we assume this amount is uniform over the asset’s useful life, we can compute the present value of the net annual cash flows.;LO 3 Explain the net present value method.;Illustration: Stewart Shipping Comp