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Capital Budgeting- Session THREE -
OutlineSection                         PageIntroduction                     3Capital Budgeting Process        6Capital Bud...
OutlineSection                                               PageInternal Rate of Return Analysis                       30...
Capital Budgeting Process (1/5)         • Generating IdeasStep 1         • Analyzing Individual ProposalsStep 2         • ...
Cash Flow Analysis Challenges (1/4)Project Interactions That Make Incremental Cash FlowAnalysis Challenging Include:      ...
Case Study 1 – NPV & IRR
Case Study 2 – NPV & Payback Period
Lease VS. Buy Decision (2/2)                                 ease can be                                 treated in 2     ...
Case Study 3 – Lease vs. Buy Decision
ConclusionCapital budgeting is a cost-benefit exercise. At the margin,the benefits from the improved decision making shoul...
Thank You For Coming Today!            Facilitator: Antoine TabbakhTel: +961 1 385 825 / website: www.bsf-lb.com          ...
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Capital Budgeting - Financial Appraisal of Investment Projects

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Transcript of "Capital Budgeting - Financial Appraisal of Investment Projects"

  1. 1. Capital Budgeting- Session THREE -
  2. 2. OutlineSection PageIntroduction 3Capital Budgeting Process 6Capital Budgeting Projects 11Capital Budgeting Assumptions 16Capital Budgeting Concepts 18Cash Flow Analysis Challenges 20Bottle Neck Analysis 24NPV Analysis 25
  3. 3. OutlineSection PageInternal Rate of Return Analysis 30Case Study 1 - NPV & IRR 33Payback Method 37Case Study 2 – NPV & Payback Period 40Capital Budgeting Application Form 45Lease VS. Buy Decision 50Case Study 3 – Lease vs. Buy Decision 52Popularity & Usage of the Capital Budgeting Methods 57Conclusion 58
  4. 4. Capital Budgeting Process (1/5) • Generating IdeasStep 1 • Analyzing Individual ProposalsStep 2 • Planning the Capital BudgetStep 3 • Monitoring and Post-AuditingStep 4
  5. 5. Cash Flow Analysis Challenges (1/4)Project Interactions That Make Incremental Cash FlowAnalysis Challenging Include: Independent vs. Mutually Project Exclusive Sequencing Projects Unlimited Funds vs. Capital Rationing
  6. 6. Case Study 1 – NPV & IRR
  7. 7. Case Study 2 – NPV & Payback Period
  8. 8. Lease VS. Buy Decision (2/2) ease can be treated in 2 ways Capital lease Operating leaseThe lessee records the leased The lessee records the leased asset on its books as a fixed asset on its books as a fixed asset and depreciates it, asset and depreciates it, while recording interest while the lessee simply expense separately records a lease payment
  9. 9. Case Study 3 – Lease vs. Buy Decision
  10. 10. ConclusionCapital budgeting is a cost-benefit exercise. At the margin,the benefits from the improved decision making shouldexceed the costs of the capital budgeting efforts.
  11. 11. Thank You For Coming Today! Facilitator: Antoine TabbakhTel: +961 1 385 825 / website: www.bsf-lb.com Email: info@bsf-lb.com/BestSolutionFinance Company/bsf #bsfbeirut

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