[vsw id=”KxjLLIVuAg0″ source=”youtube” width=”611″ height=”344″ autoplay=”no”] Pollution prevention, energy efficiency, reduced emissions, and adherence to environmental safety and regulatory standards are some of the key environmental factors which are considered in the investment analysis process. Concerning the influence of social…

Capital budgeting describes the process which companies use to make decisions on capital projects, i.e., projects whose lifespans can either be one year or more than one year. It is a cost-benefit exercise that seeks to produce results and benefits…

[vsw id=”df063ciSOSg” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Since capital budgeting describes the process by which all companies make decisions on their capital projects, it is not unusual for some fairly sophisticated techniques to be employed in its execution. Regardless of this,…

Several project interactions make the incremental cash flow analysis very challenging for analysts. Specifically, the evaluation of capital projects, as well as their selection, may be greatly affected by the extent to which there are mutually exclusive projects and project…

Several important decision criteria are used to evaluate capital investments. The two most comprehensive and well-understood measures of whether or not a project is profitable are the net present value (NPV) and internal rate of return (IRR). Other measures include…

Computing the NPV and IRR of a project to determine which project(s) among many others to undertake is not always as easy and straightforward as it seems. The IRR and NPV can, in fact, produce different ranking outcomes whenever mutually…

The concept of cost of capital informs the investment decisions that the management of a company makes. Similarly, it is useful in the valuation of a company by investors and analysts. A company that invests in a project which produces…

[vsw id=”I_SgGrDv1YM” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Taxes can have a significant impact on the weighted average cost of capital (WACC) of a company. However, taxes affect the cost of capital from different sources of capital in different ways. The Effect…

The target capital structure of a company refers to the capital which the company is striving to obtain. In other words, target capital structure describes the mix of debt, preferred stock and common equity which is expected to optimize the…

  Marginal cost of capital (MCC) plays a very important role in capital budget decision-making. When used in conjunction with the investment opportunity schedule, an optimal capital budget may be determined. Optimal Investment Decision The MCC of a company tends…