Investments with satisfactory cash flows and rates of return

Assignment Help Financial Management

Reference no: EM131508061

One duty of a financial manager is to choose investments with satisfactory cash flows and rates of return. Therefore, a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives. To do this, a sound procedure to evaluate, compare, and select projects is needed. This procedure is called capital budgeting.

Virtually all general managers face capital-budgeting decisions in the course of their careers. The most common of these is the simple “yes” versus “no” choice about a capital investment. Regardless of the type of project, however, certain principles of capital budgeting should always be considered. The most important of these principles are:

Focus on cash flows, not profits.

Focus on incremental cash flows.

Account for time.

Account for risk.

Write an essay discussing the meaning and importance of each of these principles as they apply to capital budgeting. Evaluate the importance of each principle and discuss the consequences of ignoring any of these principles.

You must use a minimum of 3 scholarly sources to support your discussion.

Reference no: EM131508061

Questions Cloud

Compute the effective annual return-pre-tax cost of debt : What is Avicorp's pre-tax cost of debt. Compute the effective annual return.

Assume your goal is to create portfolio with expected return : Assume your goal is to create a portfolio with an expected return of 12.35 percent. How much money will you invest in Stock X and Stock Y?

What adjustments are to be made to the equity accounts : What is Monica’s gain and its character? What is her adjusted basis in the remaining shares? What adjustments are to be made to the equity accounts?

Success rate in his investment recommendations : A financial talk show host claims to have a 55.9 % success rate in his investment recommendations.

Investments with satisfactory cash flows and rates of return : One duty of a financial manager is to choose investments with satisfactory cash flows and rates of return.

Weighted average cost of capital-what is the value per share : A company’s weighted average cost of capital is 10% per year and the market value of its debt is $54.2 million. what is the value per share?

Maureen operates a cosmetics sales business from her home : Maureen operates a cosmetics sales business from her home. How much can Maureen deduct for her home office if she uses the simplified method?

Split between dividends and repurchases : although it may not always be an even split between dividends and repurchases.

The dividend-discount model predict colgate stock : what price does the dividend-discount model predict Colgate stock should sell?

User Account

All Pages