BMGT 221 Chapter Notes - Chapter 13: Net Present Value, Earnings Before Interest And Taxes, Payback Period
22 Apr 2016
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Chapter 13- capital budgeting decisions: cost reduction decisions. Should new equipment be purchased to reduce costs: expansion decisions. Should a new plant, warehouse, or other facility be acquired to increase capacity and sales: equipment selection decisions. Which of several available machines should be purchased: lease or buy decisions. Should new equipment be leased or purchased: equipment replacement decisions. Capital budgeting decisions fall into 2 broad categories: screening decisions: relate to whether a proposed project is acceptable. Example: company may have a policy of accepting project only if they provide a return of at least 20% on the investment. Required rate of return is minimum rate of return a project must yield to be acceptable: preference decisions: relate to selecting from among several acceptable alternatives. Example: company may be considering several different machines to replace an existing machine on the assembly line. Choice of which machine to purchase is a preference decision.
