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Capital Budgeting And Investment Analysis

Capital Budgeting and Investment Analysis marries theory with practice by providing numerous illustrations of real-world applications. It includes a discussion of capital budgeting's link to the corporation's strategy for creating value as well as addressing the international aspects of capital budgeting. The basic philosophy of this book is to help students develop their critical thinking skills required to assess potential investments. Topics covered include the basics of capital budgeting, the estimation of project cash flows and the project cost of capital, risk analysis in capital budgeting, and corporate strategy and its relationship to the capital-budgeting decision.

The basic philosophy of this book is to help students develop their critical thinking skills required to assess potential investments.

Capital Budgeting

Capital Investment Decision

Investments in capital projects to generate flow of future economic benefits require huge amount of capital and in order to invest wisely, capital expenditures should be adequately planned and controlled. Such investments include acquisition of equipment, land and building and introduction of new products and so on.

Investments in capital projects to generate flow of future economic benefits require huge amount of capital and in order to invest wisely, capital expenditures should be adequately planned and controlled.

Capital Budgeting Under Conditions of Uncertainty

The business environment, particularly after the continuing oil crises of the seventies, can be characterized as evolving rapidly in complex and often unpre dictable ways. Such things as high interest and inflation rates, fluctuating ex change rates, volatile commodity markets, and increasing political turmoil have led to a situation in which explicit consideration of environmental dynamics is becoming much more important for successful business planning than was true in the past. Companies are finding that it is no longer possible to conduct "busi ness as usual" under these changing circumstances. Rather, decision makers are having to be more cognizant of the many sources of uncertainty that could have serious impacts on the continued prosperity of the firm, as well as of actions that can be taken so that the company can thrive in spite of these greater uncertainties. Businesses have responded to these challenges by giving more thorough con sideration to strategic issues. Whereas in the past the steady progression of mar kets and technology was taken for granted, the uncertainties associated with increased worldwide competition, as well as with other exogenous factors, have vii viii INTRODUCTION forced companies to think more about flexibility. This involves not only how best to exploit profitable current options, but also how to position themselves at present to be able to respond appropriately to threats and opportunities as they arise in the future. Unfortunately, in this redirection of outlook, the fmance profession has not kept pace.

The business environment, particularly after the continuing oil crises of the seventies, can be characterized as evolving rapidly in complex and often unpre dictable ways.