Capital Budgeting Tools
Week 5 Discussion 1
Capital Budgeting Tools
These resources will help you to complete this discussion:
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2018). Corporate finance: Core principles and applications(5th ed.). New York, NY: McGraw-Hill.
Chapter 7, “Net Present Value and Other Investment Rules,” pages 195–229. This chapter introduces the process of capital budgeting, which determines the value of a potential investment/project to a firm.
Chapter 8, “Making Capital Investment Decisions,” pages 230–261. The key to valuation of investments and projects is the cash they generate. This chapter illustrates the way to figure the all-important cash flows from investment projects.
Van Dalsem, S. (2017). Capital budgeting cash flows tutorial[Video]| Transcript. Retrieved from https://www.youtube.com/watch?v=X6HvKl__rLY&t=19s
Capital budgeting is the process to determine the value of a potential investment/project to a firm. That is, it weeds out good investments from the bad. Evaluating capital budget projects is a critical function for any business professional.
Using what you learned from the Capital Budgeting for Video Games you completed earlier in this unit and the resources provided in this discussion, prepare a post that addresses the following:
What are the strengths and weaknesses of the capital budgeting tools (financial statistics)?
Why do business professionals use all three tools?
How did performing the calculations work for you?
What did you learn from completing the calculations?
Is the information derived from the tools intuitive, or does it need further analysis?
Solution preview for the order on Capital Budgeting Tools
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