Our text writes, $$Financial managers apply two decision practices when selecting capital budgeting projects: accept$/$reject decisions and ranking decisions. The accept$/$reject decision is the determination of which independent projects are acceptable in light of the firm$$s financial objectives. Ranking is a process of comparing projects to a standard measure and ordering the mutually exclusive projects based on how well they meet the measure. The capital budgeting process is concerned only with incremental cash flows; that is$,$ those cash flows that will occur if an investment is undertaken but won$$t occur if it isn$$t$.$

Evaluate the following hypothetical examples involving the companies Netflix and Wegman$$s$.$ Revise the $2025$ budget based upon accepting$/$rejecting and financial objectives. Please provide an explanation for each revision you make. This is a creative exercise but try to build a foundational rationale.

Company

Current Budget

for $2024$

Projected Budget

for $2025$

Netflix

Subscriber retention efforts$/$improved performance

$$50$ million

$$100$ million

New movies

$$250$ million

$$600$ million

New TV series

$$150$ million

$$300$ million

Gaming$/$Game design

$$25$ million

$$150$ million

Physical stores

$$35$ million

$$70$ million

Build Movie theatres

$$70$ million

$$140$ million

Buy a competitor

$$350$ million

$$700$ million

Expand merchandise brand

$$15$ million

$$60$ million

Licensing $3$rd party content

$$75$ million

$$350$ million

Total

$$1$ Billion in USD

$$2\mathrm{.}5$ Billion in USD

Company

Current Budget

for area

Projected Budget

for area

Wegman$$s

New store builds

$$50$ million

$$225$ million

Employee training programs

$$20$ million

$$20$ million

Employee Pension Fund funding

$$100$ million

$$150$ Million

Acquire transportation company

$$100$ million

$$150$ million

Sell non$-$performing store

$$2$ million

$$2$ million

Acquire competitor

$$100$ million

$$500$ million

Develop new branded$/$white label products

$$110$ million

$$300$ million

Purchase potato farm

$$200$ million

$$300$ million

Purchase large apple orchard

$$45$ million

$$73$ million

Replace all shopping carts at every store

$$23$ million

$$30$ million

Total

$$750$ million

$$1\mathrm{.}75$ billion