CapitalBudgeting_201.. - CITT

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The Concept of the Cost of Capital • It is important to note that investment and financing decisions should be based on the investor’s marginal cost of capital. Management should avoid using subjective criterion when analyzing investment and financing proposals. The marginal cost of capital has been determined in the financial markets. This encourages management to impose market discipline on its decisions. Finally, this approach ensures that market or intrinsic value is added to shareholder wealth. ©2012, Varmelous Ind. Inc. -- Slide 8
Difficulty and importance in finding profitable projects • Due to competition, it is difficult to find new project ideas that are profitable. • If a company develops a new and profitable product, it will not be long before other companies introduce a competitive product at a lower price in order to capture market share. Such competitive forces will result in lower profits and it may happen very quickly, especially if there isn't any barrier to entry into the market. ©2012, Varmelous Ind. Inc. -- Slide 9
Page 1 and 2: Capital Budgeting Learning Outcomes
Page 3 and 4: The Concept of the Cost of Capital
Page 5 and 6: The Concept of the Cost of Capital
Page 7: The Concept of the Cost of Capital
Page 11 and 12: Capital Budgeting • When evaluati
Page 13 and 14: Capital Budgeting • Cash Flows: -
Page 15 and 16: Capital Budgeting • Discounted Ca
Page 17 and 18: Discounted Cash Flow - Net Present
Page 39 and 40: Discounted Cash Flow - (IRR) IRR DC
Page 41: About the presenter • Michel has

CapitalBudgeting_201.. - CITT

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