The five steps of capital budgeting are often described as exploring opportunities, estimating costs, determining the benefits, assessing any potential risk involved, and making the final decision. Discuss the five steps by using this following projects as examples and explain which capital budgeting technique would you be recommending:
Project : Building a new private university
TIPS:
What are the relevant cash flow (what to include, what’s not)?
5 steps capital budgeting (just taught)
What are the opportunity?
Estimate cost – to know what is the initial cost involve.
– Determine the benefits, what revenue (program offered, tuition fee)
– Net cost?
– What are the risks? Competitive? Competitive advantage
– Final decision (include NPV , IRR calculation) come out with cash flow and explain