Chapter 3 Financial Markets and Capital Budgeting
Chapter 3 Chapter 3 Financial Markets and Financial Markets and Capital Budgeting Capital Budgeting
Section 1 Capital Budgeting
Section 1 Section 1 Capital Budgeting Capital Budgeting
Financial Markets Money markets Capital markets -The primary markets the secondary market slide 2
slide 2 Financial Markets Financial Markets Money markets & Capital markets The primary markets & the secondary market
What is Capital Budgeting? The process of identifying,analyzing, and selecting investment projects whose returns (cash flows)are expected to extend beyond one year. slide 3
slide 3 What is Capital What is Capital Budgeting? Budgeting? The process of identifying, analyzing, and selecting investment projects whose returns (cash flows) are expected to extend beyond one year
The Capital Budgeting Process Generate investment proposals consistent with the firm's strategic objectives. Estimate after-tax incremental operating cash flows for the investment projects. Evaluate project incremental cash flows. Select projects based on a value-maximizing acceptance criterion. Reevaluate implemented investment projects continually and perform post-audits for completed projects. slide 4
slide 4 The Capital Budgeting Process The Capital Budgeting Process Generate investment proposals consistent with the firm’s strategic objectives. Estimate after-tax incremental operating cash flows for the investment projects. Evaluate project incremental cash flows. Select projects based on a value-maximizing acceptance criterion. Reevaluate implemented investment projects continually and perform post-audits for completed projects. Generate investment proposals consistent with the firm’s strategic objectives. Estimate after-tax incremental operating cash flows for the investment projects. Evaluate project incremental cash flows. Select projects based on a value-maximizing acceptance criterion. Reevaluate implemented investment projects continually and perform post-audits for completed projects