Got a tricky question? Receive an answer from students like you! Try us!

Critically appraise the application of traditional capital budgeting techniques. - Assignment Example

Undergraduate
Assignment
Finance & Accounting
Pages 18 (4518 words)
Download 1

Summary

Critically appraise the application of traditional capital budgeting techniques Table of Content Abstract 1. Introduction 2. Capital Budgeting and Post Completion Auditing 2.1 Objectives of capital budgeting 2.2 Developments in the Application of the Techniques 2.2.1 The Role of Post-completion Auditing 2.3 Analysis of Research methodologies 2.4 Findings 2.5 Knowledge and Use of Academic Literature 2.6 Critical Review 3…

Extract of sample
Critically appraise the application of traditional capital budgeting techniques.

At the same time, many business organizations failed to survive stiff market competition and subsequently went out of the market. The last decade witnessed a series of corporate scandals and bank failures due to poor managerial accountability and ineffective corporate governance practices. Hence, today’s managements give particular focus to corporate governance principles and long term business decisions. In this context, the concept of capital budgeting is of considerable significance because it evaluates future cash inflows and outflows on a prospective business project and thereby determines it potentiality. After the global financial crisis 2008-09, capital budgeting is specifically considered to be an integral part of the financial management. This paper clearly describes how the capital budgeting technique can contribute to the long term sustainability of business organizations. In addition, the influence of capital budgeting on managerial efficiency and organizational performance is also explained in this paper. Some recent developments in the application of capital budgeting have increased this method’s relevance in the modern business context. ...
Download paper
Not exactly what you need?

Related Essays

Capital Budgeting
Next section highlights the motivation of top management of William Hill Plc behind this acquisition deal. Subsequent section emphasizes the impact of this acquisition on the capital structure of William Hill Plc. Last section of this article describes the impact of this acquisition on the value of William Hill Plc followed by a conclusion section which leads to the end of this article. Growth Forms – Organic v/s Acquisition There are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has…
10 pages (2510 words)
Capital Budgeting
There are various capital budgeting techniques which are used in evaluation of a project so to determine its viability they include; net present value, internal rate of return, profitability index, average rate of return, pay-back period and modified internal rate of return. Guillermo Furniture is faced with three investment situations, which are to continue with the current production, adopt high-tech production, or act as a broker. Therefore, there is need to ascertain which of the investment will yield the highest returns to the firm. In order to carry out efficient investment appraisal, we…
2 pages (502 words)
Capital Budgeting Analysis
This shows that the company has improved on the efficiency of the usage of the assets of the company. This is also depicted by an improving asset turnover over the three year period. In 2003, the company generated $1.25 of revenue for every $1 invested in the assets of the company. Moreover, the company is also maintaining a strong control on its administrative and selling expenses; this is depicted by an improving net profit margin. This signifies that the company has strong growth prospects in future and could pave it way to become the market leader in its line of products. Figure 1 Figure 2…
4 pages (1004 words)
McKenzie Corporation‘s Capital Budgeting
It is of immense importance that one gets the knowledge on the market as well as comprehends the nature of the economy. Based on the calculated values the stockholders are better off with an expansion in the company. This is because the value is higher by $9 million that implies that the firm's value, as well as the profits, would increase.
8 pages (2008 words)
Capital Budgeting PROJECT ANALYSIS
The company’s target market will be the students and friends of the college. The students will be offered the skis at a discounted rate of $250, and the outsiders will purchase the skis at $600. Since the project will be generating revenue, there will be no need of finding other means of funding as the project’s operations are anticipated to generate enough revenue that will be ploughed back as a means of funding. The project was selected for the following reasons: First, project will be beneficial to college in terms of learning and management to the students because they will be exposed…
4 pages (1004 words)
Portfolio Project: Capital Budgeting Techniques
An investment of, let’s say, $100 if yields $50 every year then it’s payback period will be 2 years because the investment is recovered by the investor after 2 years. This is a very simple method to evaluate an investment but it does not take many complicated factors that play a role in capital budgeting decisions. A disadvantage of this technique is that it is not possible to understand the impact of interest rate changes and inflation in the economy. This method also assumes that exact cash flows coming in future are known. Also it is only a short term measure because some investment…
5 pages (1255 words)
Corporate Finance: Traditional Capital Budgeting
Management use various Capital budgeting techniques to make effective use of these resource to maximize firm’s value (Bennouna, Geoffrey & Marchant 2010). The key objective of an organization is to determine the investment required for expansion of the project, modernize the existing equipment to reduce the costs or to anticipate demand (Bennouna, Geoffrey & Marchant 2010). In order to make further investment, managers determine the payback period and accounting rate of returns of the long term investments (Harrison & John 2010). Though there are several Capital Budgeting Techniques, However…
6 pages (1506 words)