Why are capital budgeting decisions among the most important decisions made by any company? Give a few examples from recent business developments
What will be an ideal response?
Answer: The main objective of financial management is to maximize the value of the firm. The main source of value is the company's cash flows discounted at rates that reflect their risk. Both the firm's cash flows and their level of risk are determined by the projects the company chooses to undertake. Recent examples include Apples string of "I" products (pod, phones, pad), and Amazon's Kindle which have added tremendous value to those companies. Students may cite examples from the text such as Kimberly-Clark's Huggies or Walmart's use of central distribution centers. Examples of less than successful decisions, at least so far, might include the Segue or the Gap's ephemeral redesigned logo. (Students' answers will vary their experience and recent events.)
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River Company wants to minimize the amount of time and effort its bookkeepers spend on calculating depreciation. Since River has not been profitable, taxes are not an issue, but maximizing the profit and minimizing reported losses are major concerns. Recommend a course of action for River. Support your recommendation
Which of the following retailer practices involves buying more units than needed of a product under a sales promotion in a region where the manufacturer offers a promotion deal and shipping the surplus to their stores in nondeal regions?
A) diverting B) panic buying C) hoarding D) stockpiling E) forward buying
The prospectus must be filled with the ________ before the company can sell new issues of stocks or bonds
Fill in the blank(s) with correct word
Which of the following statements about the regulation of insurance company investments is (are) true?
I. The purpose of regulating insurance company investments is to prevent insurers from making unsound investments which could threaten their solvency. II. Life insurers can invest an unlimited amount of their assets in common stocks. A) I only B) II only C) both I and II D) neither I nor II