BUS 225 – Business Finance
20% of final grade
CASE STUDY/PROJECT:
A case study centered around capital budgeting will be assigned.
The completed case study will be graded and the grade will count as 20% of the final
grade for the course.
Being an online class, individual case study/projects will work best and be assigned.
Capital Budgeting Introduction
A logical prerequisite to the analysis of investment opportunities is the creation of investment
opportunities. Unlike the field of investments, where the analyst more or less takes the
investment opportunity set as a given, the field of capital budgeting relies on the work of people
in the areas of industrial engineering, research and development, and management information
systems (among others) for the creation of investment opportunities.
Generating ideas for Capital Budgeting for the following reasons:
Replacement: Maintenance of Business
Replacement: Cost Reduction
Expansion of Existing Products or Markets
Expansion into New Markets
Safety and Environmental Projects
Other
Use your textbook Foundations of Financial Management, 16th ed.
Stanley B. Block, Geoffrey A. Hirt, and Bartley R. Danielsen
McGraw-Hill to help with this project. Chapter 12 especially.
Link to Article on Capital Budgeting: (Use Google to search for others)
http://www.princeton.edu/~reinhard/pdfs/CAPITAL_BUDGETING_LECTURE_X.pdf
If link is not functioning, please let me know and if you find another link, send it to me.
Link to Capital Budgeting Techniques:
http://www.cliffsnotes.com/more-subjects/accounting/accounting-principles-ii/capital-budgeting/c
apital-budgeting-techniques
or
https://accountingexplained.com/managerial/capital-budgeting/
https://www.investopedia.com/university/capital-budgeting/process-at-work.asp
If link is not functioning, please let me know and if you find another link, send it to me.
Your Assignment is broken into several parts:
1. Prepare at least a two page overview of what is involved in Capital Budgeting. What is
capital budgeting? Why is it important? What would a business be involved in when the
business needs to conduct a capital budget analysis? Include the capital budgeting
process, capital budgeting decision making, etc. You may double space and use section
headings to break down the overview.
1. Find a company or any organization that has used capital budgeting and write a page
summary of what the business did, the process, what they were considering purchasing,
the options they had, the decisions they made, etc. Conduct an Internet search for this
part of your project. You may have to look deep into the financial reports of a company
to see this information. Such as in the notes to the financial statements.
1. Create a fictitious company and present two investment options and prepare a summary
chart as you see on page 391 (Table 12-6) in your textbook. Give the descriptions of the
two options, the dollar amounts, the calculations at how you arrived at the Payback
Method, the Internal Rate of Return, and the Net Present Value. Provide your reasoning
as to which investment option you will choose and why.
Put all three of these sections together in one Word document.
Use Sub-headings for each of the three sections.
Include a cover page and a reference page. Make it look professional.
Submit prior to the due date to receive credit.
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