tailieunhanh - Ebook CFIN (Student edition): Part 2

(BQ) Part 2 book "CFIN" has contents: Project cash flows and risk, the cost of capital, capital structure, managing short term assets, managing short term liabilities; financial planning and control,.and other contents. | PA R T 4 Valuation-—Real Assets (Capital Budgeting) chapter 9 Capital Budgeting Techniques Learning Outcomes Describe the importance of capital budgeting decisions and the general process that is followed when making investment (capital budgeting) decisions about fixed assets. Describe how the net present value (NPV) technique and the internal rate of return (IRR) technique are used to make investment (capital budgeting) decisions. Compare the NPV technique with the IRR technique, and discuss why the two techniques might not always lead to the same investment decisions. Describe how conflicts that might arise when using the NPV and IRR techniques can be resolved by using the modified internal rate of return (MIRR) technique. Describe other capital budgeting techniques used by businesses to make investment decisions and which techniques are used most often in practice. 144 Part 4: Valuation—Real Assets (Capital Budgeting) Problems are found at the end of this chapter + Login to CourseMate for CFIN at for additional problems and other study tools! © Clines I n the previous three chapters, we showed how financial assets are valued and how required rates of return are determined. Now we apply these concepts to investment decisions involving the fixed assets of a firm, or capital budgeting. Here the term capital refers to fixed (long-term) assets used in production, whereas a budget is a plan that details projected cash inflows and cash outflows during some future period. Thus, the capital budget is an outline of planned expenditures on fixed Study Tools assets, and capital budgeting is the process of analyzing projects and deciding (1) which are acceptable investments and (2) which should actually be purchased. Our treatment of capital budgeting is divided into two chapters. First, in this chapter we give an overview and explain the basic