Capital Budgeting Decisions. Chapter 14. Capital Investments. Long Term in nature covering many years Large amounts of capital Investments are not easily or quickly disposed Critical to long-term profitability Affect human resources needs and composition. Prior to sending out requests.
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Increase in Net cash inflows
Rate of Return X Cash Inflows
Adjusted for the loss of value over time
Present Value Multiplier X Cash Inflows
Uses PRESENT VALUE Table
Periods (Not just years) Can be Semi Annual, Quarterly, Monthly
%- estimate return rate
Based on the number of periods
Present Value of Cash InFlows ( How much is the money received in following years worth today)
Net Present Value of Project
Annual Cash inflow
Net Annual Cash Inflows
Annual Incremental Net Income