BU393 Study Guide - Midterm Guide: Net Present Value, Royal Guelphic Order, Cash Flow
Document Summary
Chapter 7: net present value and capital budgeting . Capital budgeting selection criteria, including advantages and disadvantages of each. Why npv is preferred capital budgeting criteria. Chapter 7: net present value and capital budgeting capital budgeting: decision process in which long term investments are generated, analyzed, and undertaken. The goal of the firm is to maximize firm value. The cash flow transferred to a new project from customers and sales of other products of the firm. Project classification by type: expansion: increase product line, improve productivity. Most risky, but improved the firm"s ability to produce or market its products: replacement: replace assets that have become obsolete. I. e purchase a new computer system: mandatory: legislated by government or other regulatory body. Often cost is irrelevant and no capital budgeting decision is undertaken. I. e pollution controls, retrofitting to increase accessibility by relationship: mutually exclusive: acceptance of 1 precludes adoption of 2nd. I. e deciding between 2 computer systems or 2 call centre locations.
