Finance for FMs

摘要

Capital projects compete for scarce funds and usually require economic analysis to justify their capitalization (typically funding with borrowed money). The analysis will compare projects against one another and against a pre-determined acceptable standard. Capital budgeting seeks to answer three main questions: 1. Which of several mutually exclusive (only one of several alternatives can be chosen) investments should be selected? 2. How many independent (as many can be chosen as is wise to do so) projects, in total, should be accepted? 3. When should capital be expended to accomplish the project? Capital budgeting encompasses all steps and processes involved in planning and programming expenditures for ventures (projects, campaigns, etc.) whose initial investment requirements and subsequent cash flows are expected to exceed the monetary and scheduling bounds of the operating budget.