Fundamentals of Capital Budgeting

27 Pages Posted: 30 May 2017

See all articles by John Pringle

John Pringle

University of Virginia - Darden School of Business

Robert S. Harris

University of Virginia - Darden School of Business

Abstract

This note provides an introduction to evaluation of corporate investment projects. Decision criteria such as net present value, internal rate of return, and paybacks are discussed. Specific examples are provided.

Excerpt

UVA-F-0917

Rev. Oct. 19, 2010

FUNDAMENTALS OF CAPITAL BUDGETING

In this note, we discuss the analysis of long-term investment opportunities using the basic techniques of capital budgeting. After discussing alternative decision criteria, we develop in detail the discounted cash flow approach. Finally, we mention some practical problems in applying capital budgeting techniques.

What Is Capital Budgeting?

Suppose a company has three investment opportunities under consideration: (1) building a new plant in Europe; (2) replacing its computer with a new generation of more advanced equipment; or (3) buying out one of its suppliers to ensure a source of raw materials.

. . .

Keywords: valuation

Suggested Citation

Pringle, John and Harris, Robert S., Fundamentals of Capital Budgeting. Darden Case No. UVA-F-0917, Available at SSRN: https://ssrn.com/abstract=2974339

John Pringle (Contact Author)

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Robert S. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

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