CORE CONCEPTS OF MANAGEMENT
MARKETING MANAGEMENT
FINANCIAL MANAGEMENT
HUMAN RESOURCES MANAGEMENT
OPERATIONS & PRODUCTION MANAGEMENT

Capital Budgeting
The objective of the fi rm is to maximise value (also see FM/AF06). Returns from investment in assets is what starts the value generation process. In this lesson, the author, Prof. Premchander of IIMB, a veteran of many competitive industry situations mainly concerns himself with long life assets. Evaluation of investments in long life assets is what is known as Capital Budgeting or Capital Investment Analysis. Why cash fl ows (see FM/AC5) and the timing and quantity of cashfl ows is what the author starts from. Common errors are illustrated. Techniques of evaluation such as ‘Accounting Rate of Return’, IRR and NPV are studied. The NPV computation process is elaborated. The author also points out when IRR could go wrong. Capital rationing is also within the scope of this lesson.
FM/AF02

26 Mins

22 Mins

60 Pages
Equivalent classroom time: 8hrs