Answered: How can capital budgeting tools assist…

How can capital budgeting tools assist in evaluating a manager who is responsible for retaining customers of a cellular telephone company?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 1QTD

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Why is capital budgeting important for an organization? Describe the budgeting process and the concept of capital rationing.
Why are capital budgeting decisions crucial to the long run financial health of a business enterprise?
Describe how you would use capital budgeting techniques to determine whether a business investment is a good idea. Give an example of a business investment venture and how you would use capital budgeting to ensure it is a good investment.
How is the management of any company taking many decisions to achieve the goals of different organizations. Why does a manager have to make capital budgeting decisions?
Capital budgeting can be affected by factors such as exchange rate risk, political risk, transfer pricing, and strategic risk. Select a mid- or large-sized business organization and explain how each of these factors can affect its capital budgeting. Which factor poses the greatest threat to your selected organization and why? What measures can stakeholders take to reduce adverse impacts of these factors?
You are a financial manager for the ACME Corporation. The shareholders of ACME Corporation would like to know the methods you use to make capital budgeting decision(s). Please explain the methods you use to make capital budgeting decisions. Which method(s) is/are the best? Why? Please explain your reasoning by providing quality argument.
Explain how a financial manager might estimate his or her firm’s optimal capital budget.
Select all that is true about the role of financial managers and the types of financial decisions they make. a. Capital Budgeting function involves planning and determining the firm’s short term investments. b. Determining the appropriate level of inventory is a working capital management function. c. The duties of the financial manager includes determining the capital structure and which projects the firm should undertake. d. Capital structure describes the mix of short-term liabilities a firm uses to finance its short-term assets. e. The optimal financial management strategy of a financial manager is to reduce the overall risk level of the firm. f. Size and timing of cash flows is unimportant in a capital budgeting decision.
How can a company’s board of directors use the budget to influence the future direction of the firm?
A cash budget is usually thought of as a means of planning for future financing needs. Why would a cash budget also be important for a firm that has excess cash on hand? Explain.
Why does a company evaluate both the money allocated to a project and the time allocated to the project? What is the next thing a company needs to do after it establishes investment criteria? What is the payback method used to determine? Why do businesses consider the time value of money before making an investment decision? A fellow student studying Financial Accounting says, “The net present value (NPV) weighs early receipts of cash much more heavily than more distant receipts of cash.” Do you agree or disagree? Why?
As a financial manager, what are some of the considerations you must take into account when performing capital budget analysis?