BU393- Midterm Exam Guide - Comprehensive Notes for the exam ( 29 pages long!)
Document Summary
Chapter 9: capital budgeting - introduction and techniques. Capital: refers to long-term securities and investments. Capital budgeting: process of deciding which long-term investments or projects a firm will acquire. Have to allocate limited funds in a way that provides most long-term profits. Goal of financial manager: increase shareholder wealth. These steps impro(cid:448)e firm"s a(cid:271)ility to sele(cid:272)t (cid:449)ealth-increasing projections: identification of opportunities. Firm has to have some method in place to identify new opportunities and bring to attention of mgt. Mgt usually removed from factory floor / direct customer contact. Therefore employees have to have incentive and means to communicate ideas to mgt: evaluation of opportunities. Have to evaluate an opportunity - requires that all costs and benefits are tabulated - date then has to be analyzed. In this step: focus on how to analyze datea once it has been prepared - Later: learn to organize cash flows from investment opp: selection. Have to choose which opportunity to accept.
