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Factors in Capital Budgeting Decisions
Imagine you are a representative of management in the company you have selected for your Week Six assignment (Report on Walmart Stores, Inc.) and you must make a capital budgeting decision.
The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following:
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
An explanation of how these factors are significant to the company.
A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
A calculation of the proposed return on investment based on criteria you select and justification for that ROI.
Which of the following tends to reduce industry profitability?
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