Capital Budgeting Techniques

This course will show you how a financial manager makes capital investment decisions using financial tools. It is especially the case that this course addresses the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method.

In particular, this unit will teach you how to determine which cash flows are relevant (should be considered) when making an investment decision. Say for instance, you have been asked to give your recommendation about buying or not buying a new building.

As the financial manager, it is your task to identify cash flows that, in some way or another, affect the value of the investment (in this case the building). Also, this course explains how to calculate “incremental” cash flows when evaluating a new project, which can also be considered as the difference in future cash flows under two scenarios: when a new investment project is being considered and when it is not

Completing this course should take you approximately 6 hours.

Upon successful completion of this course, you will be able to:

• Summarize the rules in capital budgeting when using net present value calculations;
• Use the incremental approach in finance to compare the net present value of a project with the net present value of another project
• Calculate the depreciation expense of an asset and demonstrate how that expense factors into the income statement and cash flow statement; and
• Calculate the net present value of an investment option

Course Curriculum