Capital Planning And Budgeting For The Future Of An Organization 's Long Term Plans

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Capital Planning & Budgeting Brent Ours American Intercontinental University Unit 1 Individual Project FINA320-1503-01 Jeffrey Hardin 7-26-2015 Abstract Capital Planning refers to the process of budgeting resources for the future of an organization 's long term plans. Capital planning includes budgeting for new or replacement machinery, research and development of new products, new plants and other major capital expenditures. Based on provided variables the Net Present Value (NPV) and Payback Periods will be calculated. A capital budget will be present whereas decisions can be made whether to accept or reject these projects. Projections will be made based on four-year time frame. Capital Planning & Budgeting The director of…show more content…
Using the figures provided calculations fro Pay Back Period, Net Present Value, Internal Rate of Return and Modified Rate of return will be determined. Additionally, the risks associated with the projects will be addressed. Capital Budgeting Capital Budgeting is the process of identifying, analyzing, and selecting investment projects whose returns (cash flows) are expected to extend beyond one year. Capital Budgeting techniques is a tool aiding in analyzing and assessing the projects from diverse perspectives such as projecting the financial outcome or inpact of accepting the project. Capital Budgeting is the use of existing capital for the purpose of increasing the long term returns of the concern. Capital budgeting reimbursements accrue in future therefore reservation accompanys every undertaking. FINA320 Unit 1 IP.xlsx Pay Back Period Payback period can be defined as the anticipated number of years needed to recuperate an original investment. Payback indicates number of years an invesment takess to return the actual cash outflows or investment. Pay Back Period = Initial Investment / Annual Cash Inflows When deciding whether to accept or reject a project: accecpt when the payback period is below the maximum payback period set by the organization. With numerous projects, importance is given to the project with the lowest payback period. Net Present Value The Net Present Value (NPV) is the difference between the
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