Capital budgeting process

1. What is the purpose of capital budgeting and why is it important?

2. How is capital budgeting related to the business organization and strategy perspective of the balanced scorecard?

3. List and briefly explain the first two steps of the capital budgeting process.

1. What is a company’s cost of capital and what role does it play in the capital budgeting process?

2. What is the return on investment and how is it related to the cost of capital?

3. What does a positive net present value tell the person making a capital budgeting decision?

Meghan Bonner wants to save $100 each month starting one month from today for the next 20 years. What will her investment be worth if she earns

A. 6 percent?

B. 8 percent?

C. 10 percent?

Solution: