Customer Service Chat
Get quote & make Payment
How capital budgeting decisions affect a company’s value, Finance Basics
Give an example of how capital budgeting decisions affect a company's value, strategy or operations.
Companies always tend to look for capex projects which will add value to the company. Any project which will enhance the value to the stakeholder will attract the company.
For eg - there is a steel making company which is heavily dependent on a third party iron -ore supplier, which is the most important raw material for manufacturing steel. The supplier increases the price of the iron - ore on its whims and fancy. This leaves the steel manufacturer on the mercy of the supplier and also suppresses its profits
The steel manufacturer decides to purchase an iron ore mine. For this it does the capital budgeting analysis of mining expenses, quantity of iron ore, onetime cost of acquiring the mine etc . The steel manufacturer found out that the cost of iron ore is coming significantly lower than the price paid to the supplier.
The steel manufacturer went ahead with acquiring the mine and saw its profits increased substantially. This lead to increase in the share price and consequently lead to increase in shareholder's wealth. This lead to increase valuation of the company.
Posted Date: 9/17/2012 9:34:00 AM | Location : United States
Ask an Expert
How capital budgeting decisions affect a company’s value, Assignment Help, Ask Question on How capital budgeting decisions affect a company’s value, Get Answer, Expert's Help, How capital budgeting decisions affect a company’s value Discussions
Write discussion on How capital budgeting decisions affect a company’s value
Your posts are moderated
Write your message here..
Calculate the weighted average cost of capital, Company XYZ stock is consid...
Company XYZ stock is considering the two new projects, Project A and Project B. The two projects have similar risk characteristics as the existing business. The managers forecast t
The income statement and the balance sheet, Conduct research and explain th...
Conduct research and explain the companies, their operations, locations, markets, and lines of business. Collect financial statements for the past three years, fiscal or calendar .
The return on the preferred stock, BAC is considering an issue of preferred...
BAC is considering an issue of preferred stock. The dividends are 8.12% of the $25 par value. a. If the present price is $26.25 per share, what is the return on the preferre
Cash flow statement, how to calculate cash flow? What components are requir...
how to calculate cash flow? What components are required to calculate it ?
project on financial planning, Financial Planning Project Instructions: ...
Financial Planning Project Instructions: You will serve as a financial advisor for your client to develop a financial plan. You can compile all the worksheets introduced in eac
Estimate the present value of benefits, (a) A couple has just celebrated th...
(a) A couple has just celebrated their 25th wedding anniversary. What is the probability of them celebrating their 50th wedding anniversary, if the husband is aged exactly 50, his
Managerial finance functions, Managerial Finance Functions Require ski...
Managerial Finance Functions Require skilful execution, control and planning of financial activities. Hence there are four significant managerial finance functions. Such are
Explain about the new issue market, Explain about the New Issue Market OR P...
Explain about the New Issue Market OR Primary Market New issue market is the segment in which new issues are made. In new issue market, new issues may be made in 3 ways name
Roa - return on assets, ROA - Return on Assets The Average of the ...
ROA - Return on Assets The Average of the industry ROA was 10.02% for 2004, 6.81% for 2005, and 7.32% for 2006. The chart showed that Lenovo had a little bit higher ROA th
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.