Question
Capital budgeting is the process of evaluating potential projects and determining which are likely to be profitable and which are not. A company's capital budget
Capital budgeting is the process of evaluating potential projects and determining which are likely to be profitable and which are not. A company's capital budget is a function of its corporate strategy, and its effects are felt throughout the organization long after the actual decisions are made. Because of the size and importance of capital investments, companies must ensure that their capital budgeting decisions are based on good information and sound analysis. For a large, multinational corporation like IBM, there are many challenges in the capital budgeting process.
Use the "Financial Condition" section of the management discussion found in IBM's 2017 Annual Report to complete this exercise.
- Did IBM amortize more or less capitalized software costs during 2017, compared to 2016? Why was there a difference?
- To analyze the sources of specific risk, IBM uses sensitivity analysis to determine the impact of different market risk exposures on the fair value of the company's assets.
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