Stakeholder Management
Proper stakeholder management is critical to the success of any organization. It involves taking appropriate steps to identify, prioritize and understand each stakeholder group so as to manage them effectively. Effective communication and engagement are, therefore, necessary if an organization…
Environmental Factors in Investment Analysis
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 factors on investment, the investment analysis…
The Capital Budgeting Process
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…
Basic Principles of Capital Budgeting
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, capital budgeting relies heavily on just…
Mutually Exclusive Projects
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…
NPV Profile
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…
Weighted Average Cost of Capital (WACC)
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…
How Taxes Affect the Cost of Capital
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 of Taxes on Debt In many…
Target Capital Structure and WACC
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…
