Finance Mini Case Chp11

2716 Words Dec 16th, 2008 11 Pages
Mini Case Chapter 11

a. What is capital budgeting?

Capital budgeting is the decision process that managers use to identify those projects that add value to the firm’s value, and as such it is perhaps the most important task faced by financial managers and their staff. The process of evaluating projects is critical for a firm’s success. Capital budgeting is

• Analysis of potential additions to fixed assets

• Long term decisions; involving large expenditures

• Very important to a firm’s future

• Define the firm’s strategic directions

b. What is the difference between independent and mutually exclusive projects?

An independent project is one in which accepting or rejecting one project
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