WEEK 11
CAPITAL BUDGETING
What is CapitalBudgeting
Its theprocessofevaluating investments in long termassets
Propertyplantandequipment
RED
Technology
Brandinvestments
Why it matters
Involveslargecashcommitments
Decisions are
oftenirreversible
Determinesstrategic direction
Affectslongtermrisk andperformance
CashFlowComponents
Use cash
flows not accuralaccountingincome
Include
Initial investment
Operatinginflows outflows
Working capitalchanges
Salvage value
Opportunity costs
Exclude
clunkcosts
Depreciation ignoredexcept for taxpurposes
CAPITAL BUDGETING
What is CapitalBudgeting
Its theprocessofevaluating investments in long termassets
Propertyplantandequipment
RED
Technology
Brandinvestments
Why it matters
Involveslargecashcommitments
Decisions are
oftenirreversible
Determinesstrategic direction
Affectslongtermrisk andperformance
CashFlowComponents
Use cash
flows not accuralaccountingincome
Include
Initial investment
Operatinginflows outflows
Working capitalchanges
Salvage value
Opportunity costs
Exclude
clunkcosts
Depreciation ignoredexcept for taxpurposes