Module 3 - Financial Management PDF
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Uploaded by PleasurableNarrative
Advanced Learning Institute for Management Studies
Thajudheen P K
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Summary
This document is a module on financial management, specifically focusing on capital budgeting. It details investment decisions, the capital budgeting process, and different types of capital budgeting decisions. The document appears to be prepared by Thajudheen P K from Advanced Learning Institute for Management Studies.
Full Transcript
ADVANCED LEARNING INSTITUTE FOR MANAGEMENT STUDIES MODULE-3 Prepared by Thajudheen P K CAPITAL BUDGETING The firm’s investment decisions would generally include expansion, acquisition, modernization and replacement of long-term assets. Involve huge amount of investment and ar...
ADVANCED LEARNING INSTITUTE FOR MANAGEMENT STUDIES MODULE-3 Prepared by Thajudheen P K CAPITAL BUDGETING The firm’s investment decisions would generally include expansion, acquisition, modernization and replacement of long-term assets. Involve huge amount of investment and are irreversible The future benefits are expected to be released over a series of years Capital Budgeting Process 1. Identification of potential investment opportunities 2. Assembling of investment proposal 3. Decision making 4. Preparation of CE budget 5. Implementation 6. Performance review Kinds of capital budgeting decision 1. Mutually exclusive – If one investment is undertaken, others will have to be excluded 2. Capital rationing decisions – Investments on the basis of priorities 3. Contingent Investments – The choice of one investment necessitates undertaking one or more other investments. 4. Accept reject decision – IRR>cost of capital (accept), IRR
