Managerial Accounting

11.

Capital Budgeting

11.1.

Capital Budgeting Overview

11.1.1.

Definition and Purpose

11.1.2.

Types of Capital Budgeting Decisions

11.1.2.1.

Expansion Decisions

11.1.2.2.

Replacement Decisions

11.1.2.3.

Cost Reduction Projects

11.1.3.

Cash Flow Focus

11.1.3.1.

Cash Flows vs Accounting Income

11.1.3.2.

Timing of Cash Flows

11.1.3.3.

Tax Considerations

11.2.

Time Value of Money

11.2.1.

Present Value Concepts

11.2.2.

Future Value Concepts

11.2.3.

Discount Rate Determination

11.2.4.

Annuity Calculations

11.3.

Discounted Cash Flow Methods

11.3.1.

Net Present Value

11.3.1.1.

NPV Calculation Steps

11.3.1.2.

Decision Criteria

11.3.1.3.

11.3.1.4.

NPV Limitations

11.3.2.

Internal Rate of Return

11.3.2.1.

IRR Calculation Methods

11.3.2.2.

Decision Criteria

11.3.2.3.

11.3.2.4.

IRR Limitations

11.3.2.5.

Multiple IRR Problem

11.3.3.

Profitability Index

11.3.3.1.

Calculation Formula

11.3.3.2.

Decision Applications

11.4.

Non-Discounted Methods

11.4.1.

11.4.1.1.

Simple Payback Calculation

11.4.1.2.

Discounted Payback Period

11.4.1.3.

Advantages and Limitations

11.4.2.

Accounting Rate of Return

11.4.2.1.

Calculation Methods

11.4.2.2.

Advantages and Limitations

11.5.

Cash Flow Estimation

11.5.1.

Initial Investment

11.5.1.1.

11.5.1.2.

Installation Costs

11.5.1.3.

Working Capital Requirements

11.5.2.

Operating Cash Flows

11.5.2.1.

Revenue Effects

11.5.2.2.

11.5.2.3.

11.5.3.

Terminal Cash Flows

11.5.3.1.

11.5.3.2.

Working Capital Recovery

11.5.3.3.

11.6.

Risk Analysis in Capital Budgeting

11.6.1.

Sensitivity Analysis

11.6.2.

Scenario Analysis

11.6.3.

Risk-Adjusted Discount Rates

11.7.

Capital Rationing

11.7.1.

11.7.2.

11.7.3.

Project Ranking Methods

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12. Advanced Managerial Accounting Topics