Capital budgeting tools and analysis of capital expenditures

Type :

Term papers

Pages :

35 pages

Format :

.doc

Published date :

04/16/2009

Category :

Business & market

Sub category :

Finance

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Summary :

Introduction
1. Objectives of the projec
2. Key requirements for the project evaluation
3. Research methodology
4. Data analysis
Research design
1. Research methodology
2. Data source
3. Data analysis
Financial review and analysis
Application of cash
Introduction to project
1. Introduction
2. Capital budgeting procedure
3. Methods of financial evaluation
4. Financial evaluation criteria
The capital budgeting framework
1. Identify alternatives
2. Forecasting cashflows
3. Determine cost of capital
4. Estimate terminal value
5. Risk analysis
6. Capital rationing and planning
7. Capital budgeting at aditya birla group
Estimating capital
Analysis
1. Calculation of the Cost of Capital:
2. Estimation of cost of equity
3. Estimation of growth rate
The company's cost of debt
WACC of the company 2006
WACC of the company 2007
Project analysis
Execution of the project sanctioned
Findings
Suggestions
Conclusion
Bibliography

Abstract

capital budgeting is a financial procedure to ensure that capital is allocated to value adding opportunities. A capital budgeting / investment proposal should be accepted /rejected depending on whether it generates, over the life of investment, returns more than its cost of capital.
"capital budgeting is concerned with the allocation of the firm's scarce financial resources among the available market opportunities. The consideration of investment opportunities involves the comparison of the expected future streams of earnings from a project, with the immediate and subsequent expenditures for it."

An analysis of the above definition shows that capital budgeting correlates the planning of available financial resources and their long term investment with a view to maximize the profitability of the firm. The financial manager has to focus on maximizing the wealth of shareholders through investment decisions. Investment decisions are long-term strategic decisions. Thus, he should be in apposition to evaluate whether a particular investment will facilitate achievement of this goal or not. It is also known as investment decision, capital expenditure, capital expenditure planning, project planning etc. it is a process of making decision regarding investments in fixed assets which are not meant for sale such as land, building, machinery or furniture capital budgeting is the planning of the expenditure for a future return. It returns stretch themselves beyond a one-year time interval. capital expenditure planning and control is a process of facilitating decisions covering expenditures on long-term assets. Since a company survival and profitability hinges on capital expenditure, specially the major ones, the importance of the capital budgeting process cannot be over emphasized.