The Investment Detective

2 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Sean Carr

University of Virginia - Darden School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

Students must evaluate eight projects' cash flows and rank the projects in terms of their economic attractiveness. Students can use all possible criteria [net present value (NPV), internal rate of return (IRR), return on investment (ROI), profitability index, and payback]. This case introduces the valuation and comparison of capital investments. With advanced students, the case can be used to review the effects of unequal project lives and uncertain discount rates. Student and instructor worksheet files are available for use with the case and teaching note.

Excerpt

UVA-F-0813

Rev. Mar. 21, 2016

The Investment Detective

The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm's capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital-budgeting analyst, therefore, is necessarily a detective who must winnow bad evidence from good. Much of the challenge is in knowing what quantitative analysis to generate in the first place.

Suppose you are a new capital-budgeting analyst for a company considering investments in the eight projects listed in Exhibit1. The CFO of your company has asked you to rank the projects and recommend the “four best” that the company should accept.

In this assignment, only the quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive.

. . .

Keywords: capital budgeting, corporate finance, resource allocation, investment cash flow, valuation

Suggested Citation

Bruner, Robert F. and Carr, Sean, The Investment Detective. Darden Case No. UVA-F-0813, Available at SSRN: https://ssrn.com/abstract=1278842

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Sean Carr

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4812 (Phone)

HOME PAGE: http://www.batteninstitute.org

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
358
Abstract Views
2,337
rank
16,510
PlumX Metrics