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Week 9 : Long-term Decision Making


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LEARNING OUTCOME

By the end of this topic, you should be able to:

  • Understand the importance of capital budgeting and the concepts underlying strategic and capital investment decisions
  • Describe and use two no discounted capital budgeting techniques: the payback method and the unadjusted rate of return method
  • Describe and use two discounted capital budgeting techniques: the net present value method and the internal rate of return method
  • Understand the need for evaluating qualitative factors in strategic and capital investment decisions
  • Use sensitivity analysis to assess the potential effects of uncertainty in capital budgeting
  • Explain how to use capital budgeting techniques in ranking capital investment projects
  • Explain how income taxes affect capital budgeting decisions