For this week’s assignment, review the readings and any outside research you have done related to how the evaluation process and selection of capital projects are affected by mutually exclusive projects, project sequencing, and capital rationing. Pay particular attention to Burns and Walker’s 2009 article, “Capital Budgeting Surveys: The Future is Now,” which was assigned in this unit. (Attached)
Instructions
Write a 4- to 5-page paper that summarizes your conclusions about capital budgeting. Include the following:
• Analyze the major components of capital budgeting process evaluation and selection of capital projects.
• Explain the rationale and the effect of mutually exclusive projects.
• Examine some of the foundations and key issues of capital budgeting decision making, including how companies can determine the success of their portfolio of investment projects and decisions on capital rationing.
• Assess ethical considerations that may arise in capital budgeting.
• Compare and contrast project sequencing and capital rationing.
• Explain the calculation and interpretation of net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI) of a capital project.
• Explain the calculation and interpretation of the weighted average cost of capital (WACC), including how taxes affect the cost of capital from different capital sources.
• Based on the article, briefly evaluate the current development on capital budgeting and benefits discussed by Burns and Walker (2009).
