CAPITAL BUDGETING TECHNIQUES

CAPITAL BUDGETING TECHNIQUES

There are differ capital budgeting techniques some important are here

Payback Method
NPV (Net Present Value)
IRR (Internal  Rate Return)

Payback Method:

Decision Rules:

According to this method the company should select that project who covers the intinal cost in minimum time period.

Drawback:

This method ignor the cash inflows which occurs after the payback time period and it is not very good method.

Example:

suppose                                     cost                                         year
                                                                                 1               2                 3
A                                             (5000)                    3000         2000              1000

B                                              (5000)                   4500          300               10,000

which one will select company will select the project A because the intial cost of 5000 will be return in first 2 years and third year will come the profit/return.

FINANCIAL MANAGEMENT
DECISION AREA OF FINANCIAL MANAGEMENT
AGENCY PROBLEM
TYPES OF BUSINESS
FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES
TYPES OF FINANCIAL MARKETS
TIME VALUE OF MONEY
EXAMPLES AND FORMULA TIME VALUE OF MONEY
CASH FLOW,SUM,SERIES OF CASH, ANNUITY AND MIX STREAM
ANNUITY TYPES AND FORMULA
AMORTIZATION SCHEDULE OR TABLE WITH EXAMPLE
EFFECTIVE INTEREST RATE WITH EXAMPLE
VALUATION OF LONG TERM SECURITIES (BONDS)
TYPES OF BONDS
BONDS FORMULA,ZERO COUPON PERPETUAL
VALUATION OF LONG TERM SECURITIES (SHARE)
CASH AND MARKETABLE SECURITIES MANAGEMENT
MANAGING CASH INFLOW AND OUTFLOW
SECURITIES MANAGEMENT
SHORT TERM FINANCING
SPONTANEOUS LABILITIES
NEGOTIATED FINANCE
CAPITAL BUDGETING
CAPITAL BUDGETING TECHNIQUE
NET PRESENT VALUE TECHNIQUE
INTERNAL RATE OF RETURN TECHNIQUE
ACCOUNT RECEIVABLE MANAGEMENT
INVENTORY MANAGEMENT
FORCASTING

MBA NOTES FINANCIAL MANAGEMENT