Financial Management

18

Capital Budgeting Techniques

“When buying shares, ask yourself, would you buy the whole company?”

 

Rene Rivkin

LEARNING OBJECTIVES

After reading the chapter, you will be able to:

1. Look at the capital investment selection techniques.

2. Understand non-discounting techniques like payback and the accounting rate of return method.

3. Understand discounting techniques like the net present value method, internal rate of return method, profitability index method and discounted payback method.

4. Discuss the concept and rationale for calculating modified net present value and modified internal rate of return.

5. Describe the concept of capital rationing and understand the selection of projects under capital rationing.

FINANCE IN PRACTICE

Hindalco Industries ...