财务管理英文课件：C6-Capital Budgeting and Estimating Cash Flows.pptVIP

12.* Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. ? Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Chapter 6(12) Capital Budgeting and Estimating Cash Flows After Studying Chapter 12, you should be able to: Define capital budgeting and identify the steps involved in the capital budgeting process. Explain the procedure to generate long-term project proposals within the firm. Justify why cash, not income, flows are the most relevant to capital budgeting decisions. Summarize in a “checklist” the major concerns to keep in mind as one prepares to determine relevant capital budgeting cash flows. Define the terms “sunk cost” and “opportunity cost” and explain why sunk costs must be ignored, while opportunity costs must be included, in capital budgeting analysis. Explain how tax considerations, as well as depreciation for tax purposes, affects capital budgeting cash flows. Determine initial, interim, and terminal period “after-tax, incremental, operating cash flows” associated with a capital investment project. Capital Budgeting and Estimating Cash Flows The Capital Budgeting Process Generating Investment Project Proposals Estimating Project “After-Tax Incremental Operating Cash Flows” What is Capital Budgeting? The process of identifying, analyzing, and selecting investment projects whose returns (cash flows) are expected to extend beyond one year. The Capital Budgeting Process Generate investment proposals consistent with the firm’s strategic objectives. Estimate after-tax incremental operating cash flows for the investment projects. Evaluate project incremental cash flows. The Capital Budgeting Process Select projects based on a value-maximizing acceptance criterion. Reevaluate implemented investment projects continually and perform postaudits for completed projects. Classification of Investment Project Proposals 1. New products or expansion of existing products 2. Replacement of existing equipment or building