tailieunhanh - Lecture Contemporary financial management (9th Edition): Chapter 8 - Moyer, McGuigan, Kretlow

Chapter 8 - Capital budgeting and cash flow analysis. This chapter discusses capital budgeting and capital expenditures. It deals with the financial management of the assets on a firm’s balance sheet. | 8 Capital Budgeting and Cash Flow Analysis Introduction This chapter discusses capital budgeting and capital expenditures. It deals with the financial management of the assets on a firm’s balance sheet. Capital Budgeting Capital Budgeting is the process of planning for purchases of assets whose returns are expected to continue beyond one year. Capital Budgeting Capital Expenditure A cash outlay expected to generate a flow of future cash benefits for more than one year. A normal operating expenditure expected to result in cash benefits during the coming one-year period. (The choice of a one-year period is arbitrary, but it does serve as a useful guideline.) Capital Budgeting Capital budgeting decisions can be the most complex decisions facing management. Several different types of outlays may be classified as capital expenditures and evaluated using the framework of capital budgeting models. (See next several slides.) Types of Capital Expenditure The purchase of a new piece of equipment, real estate, or a building in order to expand an existing product or service line or enter a new line of business The replacement of an existing capital asset, such as drill press Expenditures for an advertising campaign Types of Capital Expenditure Expenditures for a research and development program Investments in permanent increases of target inventory levels or levels of accounts receivable Investments in employee education and training Types of Capital Expenditure The refunding of an old bond issue with a new, lower-interest issue Lease-versus-buy analysis Merger and acquisition evaluation Capital Expenditure Decisions Capital expenditures are important to a firm both because they require sizable cash outlays and because they have a long-range impact on the firm’s performance. Capital Expenditure Decisions A firm’s capital expenditures affect its future profitability and, when taken together, essentially plot the company’s future direction by determining the following things: . | 8 Capital Budgeting and Cash Flow Analysis Introduction This chapter discusses capital budgeting and capital expenditures. It deals with the financial management of the assets on a firm’s balance sheet. Capital Budgeting Capital Budgeting is the process of planning for purchases of assets whose returns are expected to continue beyond one year. Capital Budgeting Capital Expenditure A cash outlay expected to generate a flow of future cash benefits for more than one year. A normal operating expenditure expected to result in cash benefits during the coming one-year period. (The choice of a one-year period is arbitrary, but it does serve as a useful guideline.) Capital Budgeting Capital budgeting decisions can be the most complex decisions facing management. Several different types of outlays may be classified as capital expenditures and evaluated using the framework of capital budgeting models. (See next several slides.) Types of Capital Expenditure The purchase of a new piece of .