Skip to main content

CAPITAL BUDGETING

CAPITAL BUDGETING

Definition:
The process of evaluating and selecting the project is called capital budgeting process of capital budgeting.

Decision Area:

Accept or Reject:
In this area preffer the project that return is more
Example:
A                B                 C
20%           30%             10%
 B will be preffer

Ranking:
In which we select on ranking rate.
Example:
A                   B                   C
-10%            10%               -20%

B will be preffer

Types of Projects

Independent  Project
dependent Project

Independent Project:
The project which cannot compet or depend on each other is called independent project.
Example:

A                                      B                                C
machine                        Frenchise                      Telecom

both of three can be accept or reject because all are differ from each other. In which if company select one other will not be rejected.

Dependent Project:
The project which compete or depend on each other is called depended project.

Example:
A                               B                                  C
sony                           LG                              H.P

suppose all companies have tv and if company buy one company tv then other will also be rejected. so thats why one select and other reject in this project.

Capital Budget Process:

stage 1:
Available project

stage 2:
(cash inflow + cash outflow)=cost return
company will see cost and return on the project.
stage 3:
Evaluate and Select
stage4:
Implementation.



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
Labels:

Comments

Post a Comment

Popular posts from this blog

MARKOWITZ MODEL

MARKOWITZ MODEL Portfolio Selection: If number of portfolio we use this method to select the portfolio. for example groups of protfolios sample A:  NBP, Nestle B:  NBP, Nestle, MCB C:  Lucky, Nestle Feasible Set of Portfolio: The number of portfolio which are available for their selection Efficent Portfolio: (Max. return, less risky) The portfolio which is selected from the feasible set of protfolio. Decision Rules 1: If the different portfolio have same return then we select that portfolio who's risk is minimum. Decision Rules 2: If the different protfolio have same risk then we should select that portfolio who's return is maximum. Draw Back: This model just focus only those portfolio who's return are same or risk are same. It ignore the other portfolio. Example: No. of Portfolio          Return          Risk A                       ...
Post a Comment
Read more

RETURN PORTFOLIO ANALYSIS

RISK AND RETURN  PORTFOLIO ANALYSIS To check how much return and risk will be faced by investor on portfolio investment is called risk and return protfolio analysis In this question we show only how to calculate return. Suppose after analysis we get these results     Pepsi E(R) = 12%    S.D= 9%        amount=50000 Nestle E(R) = 20%  S.D= 12%       amount=30000 Lucky Cement = E(R) = 10%  S.D= 5%     amount=20000 what will be tatal risk and return? Portfolio Return: R p = ∑W x  E (R)  Rp = Return on portfolio E(R) = Expected return ∑W = weights what formula will be for three securite return calculation Rp = Wa x  E (R)a + Wb x  E (R)b +Wc x  E (R)c Weight: The portion of your investment amount invest in a single security is called weight. Weight of single security = single security amount / total all securities amount Tatal amount = 50000 + 300...
Post a Comment
Read more

CAPM MODEL (CAPITAL ASSET PRICING MODEL)

According to this model company have to face two main types of risk. Risk= Systematic + un-systematic Systematic Risk: The risk face by the company due to its external environment is called systematic risk. This risk cannot be controled by the company. Example: Pocitical instability, war in the country, energy crises in the country etc. Un-Systematics Risk: The risk face by the company due to its internal environment is called un-systematic risk.This risk can be conroled by the company. Example: shortage of employees, Clash between the management etc. CAP MODEL: A model which shows the relationship between the systematic return and not shows un-systematic. _ R = R f + ( R m - R f) x    β (beta) _ R = Return (expected) R f = Risk free Return The minimum return which is desire by the investor R m = Market Return The return which is provided by the market β = systematic Risk Note = when minimum then always keep the Rf value less and Rm val...
Post a Comment
Read more