Assignment: Capital Budgeting
Module Overview
A business starts when an idea is put into action. However, before you start a new business, you should check the idea for feasibility and profitability. This means that you should study the market-what customers want and what the market has to offer. Market research will help you analyze whether your product, service, or process can fill a gap.
In the previous modules, you discussed some components involved in management's decision-making process. In this module, you will continue to discuss those concepts. One critical decision made among companies is to price a product or a service. Pricing a product or a service requires a balance to establish a price that covers all the associated costs. At the same time, the price should not be too high to deter consumers from purchasing. This module will introduce you to various costing modules that management can use to estimate or determine the cost of its product or service.
With few exceptions, businesses either grow or fail. If projects simply become bigger but do not change in character, the firm can grow financially with little growth in people. However, in most of the cases, growth comes from a combination of bigger projects and smaller projects-and these require more people. However, a company must demonstrate financial controls at every level of the organization-and the only way to do this is by sharing the discipline of financial decision making throughout the firm.
Module Readings
Complete the following readings early in the module:
• Module overview
• From your course textbook, The portable MBA in finance and accounting, 4th, read the following chapters:
o Forecast and Budgeting
o Cost Structure Analysis, Profit Planning, and Value Creation
o Activity-Based Costing
Module Conclusion
An understanding of cost behavior is vital in developing pricing strategies. Making profit is the primary objective for any for-profit entity.
To make a product, the costs to produce a product or the costs to provide a service as well as the related administrative costs must be recovered when sold. Applying the costing methods and techniques discussed in this module will assist management in making such decisions. In addition, management must understand how each category of costs, such as direct costs vs. indirect costs or fixed costs vs. variable costs, behaves in order to make well-informed decisions about cost effectiveness and efficiency.
In this module's assignments, you will evaluate the considerations necessary to determine an appropriate business form for a new business. You will also evaluate the financial aspects of making decisions.
Instruction
Capital budgeting is a tool used in business to determine the financial viability of a potential project. Net present value, internal rate of return, payback, discounted payback, and modified rate of return are some of the calculations used once businesses have a reliable cash flow budget for their project.
In this assignment, you will demonstrate your understanding of the necessary aspects of capital budgeting.
Tasks:
Respond to the following:
• What is capital budgeting and why is it important to business decisions?
• Discuss how the information should be organized in a capital budgeting process, and who will use the information for decision-making.
• What could go wrong with the capital budgeting process?
• Provide an example of a capital budgeting process from an online source and explain the salient points of this example to the class.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.