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In capital budgeting with unequal lives first of all time lines are stretched to match exacly same number of years to find out the capital budgeting decision for example one asset with 3 years and another asset is for 4 years will equal to year 12 with asset one will be purchased 4 times while asset two will be purchased for 3 times and then all calculations related to cash inflows and outflows are done.
Wiki User
∙ 9y ago
Wiki User
∙ 9y agoIn capital budgeting with unequal lives first of all time lines are stretched to match exacly same number of years to find out the capital budgeting decision for example one asset with 3 years and another asset is for 4 years will equal to year 12 with asset one will be purchased 4 times while asset two will be purchased for 3 times and then all calculations related to cash inflows and outflows are done.
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Significance of cost of capital in financial decision making?
capital budgeting decisions capital structure decisions
When a firm chooses to buy a new fixed assets it is making a decision?
capital budgeting
Should financing cost be included as an incremental cash flow in capital budgeting analysis?
Incremental Cash flows are included in capital budgeting decision and if capital budgeting decisions require acquisition of money from open market then its financial cost is also relevant for decision making and it is also included in it.
Why does capital budgeting look at cash flows and not net income?
Affect of net income is hard to determine due to any specific assets that's why capital budgeting decision making involves cash flows to determine cost and benefit analysis.
Can Present value be added to determine the value of capital budgeting project?
As capital budgeting involve decision making which is for long term time period that's why time value of money imprecations are included while calculating capital budget and that's why present value of actual cash flows are used rather the real value of cash flows.
What is capital budgeting decision under uncertainty and risk?
Capital budgeting entails decisions to commit present funds in long term investment in anticipation of future returns. The future is usually of long term nature spanning over five years. The amount of investment and the returns from the cannot be predicted with certainty due to certain variables like market for the product, technology, government policies, etc. The uncertainty associated with the investment and the returns is what makes decision makers to consider probabilty distributions in their estimates, hence, making capital budgeting to be considered under uncertainty and risk.
What has the author John Breen Benton written?
John Breen Benton has written: 'Managing the organizational decision process' -- subject(s): Decision making, Program budgeting, System analysis 'Program budgeting and executive commitment' -- subject(s): Program budgeting
What are the prerequisites of Capital Budgeting?
When making capital budgeting decisions the following need to be considered:Accounting rate of returnPayback periodNet present valueProfitability indexInternal rate of returnModified internal rate of returnEquivalent annuityReal options valuation
What role does the cost of capital play in the financial decision making of the firms top managers?
What role does the cost of capital play in the financial decision making
What are the important considerations in the capital budgeting process?
1. Search and discovery of investment opportunities 2. Collection of data 3. Evaluation of alternatives and decision making 4. Plan implementation 5. Ongoing reevaluation and adjustment
What are the important administrative considerations in the capital budgeting process?
1. Search and discovery of investment opportunities 2. Collection of data 3. Evaluation of alternatives and decision making 4. Plan implementation 5. Ongoing reevaluation and adjustment
How does book keeping affect performance of small medium enterprises?
information well kept can assist in budgeting and decision making
