Description
This course will show how to make capital budgeting decisions from a corporate finance perspective.
We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.
Capital budgeting decisions involve planning for projects and future cash flows extending more then one year into the future. The common example of a capital budgeting decision is the decision to purchase a large piece of equipment that will impact future cash flow for multiple years.
The typical format of a capital budgeting decision often includes a cash out flow a time period zero, resulting in cash inflows, or reduced outflows due to increase efficiencies, over multiple years.
Because capital budgeting decisions impact cash flows for multiple years, time value of money concepts are used, including present value of one calculations and present value of annuity calculations.
The primary tools used in capital budgeting decisions are the net present value calculation (NPV) and the internal rate of return calculation (IRR). Both of these tools utilize time value of money concepts, and we will spend a lot of time with them.
We will also discuss the payback period calculation and the modified internal rate of return or (MIRR).
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