Question
Microsoft: Capital investment covers a broad array of projects, from small items of machinery and equipment to major acquisitions. A project usually requires a relatively
Microsoft: Capital investment covers a broad array of projects, from small items of machinery and equipment to major acquisitions. A project usually requires a relatively large outlay up front, and going forward is expected to provide a series of incremental cash flows driven by increased revenues and/or reduced costs. In addition, some amount of salvage value may be realized at the end of the project's life. Within this framework projects could exhibit many different cash flow patterns.
Apply capital budgeting criteria to investments with a variety of cash-flow patterns.
Evaluate the appropriate use of those criteria in ranking multiple investments when capital is rationed.
Estimate relevant cash flows for specific investment proposals (both cost savings and increased revenues)
Distinguish sunk costs, side benefits, and incremental cash flows.
Determine the component costs of capital on the basis of current market conditions.
Apply the weighted average cost of capital as the discount rate for the average investment for a firm.
Please help!
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