Capital Budgeting 
        Capital Budgeting 
        Techniques
        Techniques
        ProjProjeect Evaluatioct Evaluation ann and Selectd Selectiionon
        PoPotetenntial Diftial Difficficuultiltieess
        CaCappital ital RRatioationinningg
        ProjProjeect Moct Monitnitoringoring
        PoPosst-Complt-Compleetition on AudiAuditt
13-2
        Project Evaluation:  
        Project Evaluation:  
        Alternative Methods
        Alternative Methods
        PayPaybbacack Perk Periiodod (PBP (PBP))
        IInternternnaall Ra Rate ote of Ref Retuturrnn (I (IRRR)R)
        NeNet t PrePresesennt Vt Valualuee  (N(NPV)PV)
        ProfiProfitatabbililityity  InIndexdex  (PI)(PI)
13-3
        Proposed Project Data
        Proposed Project Data
   JJuulliie e MMiillllerer  iis s eevvalaluuaattiinngg  aa  nneeww  pprroojjecectt  
     ffoorr  hheerr  ffiirrmm,,  BBasaskekett  WWoonnddeerrs s ((BBWW))..    
    SShhee  hhaass  ddeetteerrmmiinneedd  tthhatat  tthhee  aafftteerr--ttaax x 
      cacasshh  fflloowwss  ffoorr  tthhee  pprroojjeectct  wwiillll  bbe e 
     $1$100,,000000;;  $$1212,,000000;;  $$1515,,000000;;  $$110,0,00000;0;  
     aanndd  $7$7,,000000,,  rreespspececttiivveellyy,,  ffoorr  eeacachh  ooff  
      tthhe e YYeeararss  11  tthhrroouugghh  55..    TThhee  iinniittiiaall  
         ccaashsh  oouuttllaay y wwiillll  bbe e $$440,0,000000..
13-4
         Independent Project
    For this project, assume that it is 
     independent of any other potential 
     projects that Basket Wonders may 
     undertake.
    Independent -- A project whose 
     acceptance (or rejection) does not 
     prevent the acceptance of other 
     projects under consideration.
13-5
        Payback Period (PBP)
        Payback Period (PBP)
    0             1              2             3             4           5
    -40 K          10 K           12 K          15 K           10 K          7 K
          PBPBPP  is this thee  perperiiod od of tof timime e 
        rrequequireiredd fo forr t thehe  cumulativecumulative  
        exexpectepectedd ca cash sh floflowsws  frfroomm  an an 
        iinvenvestmestmennt projt projeect toct to equ equaall  
          ththee  ininitial itial ccasashh o outfloutfloww..
13-6