Assessment 4: Case Study
Due date: Week 10
Group/individual: Individual
Word count/Time provided: 1500 words
Weighting: 30%
Unit Learning Outcomes: ULO1, ULO2, ULO4
Assessment 4 Detail
The assignment is designed for students to practice the Capital Budgeting Process in project
management by studying real case study. The nominated case study is from International Review of
Business and Economics, Volume 4, Special Issue No.1, July 2020, pp XXXXXXXXXX, ISSN: XXXXXXXXXX
(Online XXXXXXXXXXPrint), EFFECTIVE CAPITAL BUDGETING DECISIONS BY FIRMS by MANJUNATH
M.S. and PRAVEEN B.
Guidelines for writing Critical Review & Evaluation:
1) Read the nominated case study.
2) Provide background of the case study.
3) Describe Capital Budgeting Process used in the case study.
4) What other factors were considered besides Capital financing and allocation functions during
Capital Budgeting Process? Was there any managerial considerations and complications?
5) Provide critical review and evaluation. Evaluate and make recommendations in relation to
the capital invested in this case study.
The Report should include:
• Introduction
• Body of report (background of the case study, cost structure, factors affecting decision
eside the cost, critical evaluation)
• Concluding section (findings, recommendations)
Assessments 4 Marking Criteria and Ru
ic
The assessment will be marked out of 100 and will be weighted 30% of the total unit mark. The
marking criteria and ru
ic are shown on the following page.
Assessment 4 Marking Criteria and Ru
ic
Marking Criteria Not Satisfactory
(0-49% of the criterion
mark)
Satisfactory
(50-64% of the criterion
mark)
Good
(65-74% of the criterion
mark)
Very Good
(75-84% of the criterion
mark)
Excellent
(85-100% of the criterion
mark)
Introduction (10 marks)
Providing an introduction
and background to the
selected case study.
Inadequate knowledge to
introduce the project case,
Basic knowledge of writing
an introduction to the case
project,
Exhibits a factual and/or
conceptual skills to provide
introduction to the case
project
Exhibits accurate & detailed
eadth & depth of
ackground of case project.
Displays excellent skills in
writing an introduction to
the case project,
Description of Capital
Budgeting Process (30
marks)
Describing Capital Budgeting
Process for the chosen case
study. Capital financing and
allocation functions
Inadequate description of
capital budgeting process,
Basic knowledge of capital
udgeting process,
Exhibits
a factual and/or conceptual
skills to describe capital
udgeting process,
Exhibits accurate & detailed
eadth & depth to describe
capital budgeting process,
Displays Excellent skills to
describe capital budgeting
process,
Consideration of other
factors (30 marks)
Consideration of other
factors, Managerial
considerations, and
complications
Inadequate, Consideration
of other factors, Managerial
considerations &
complications
Basic knowledge to consider
other factors, Managerial
considerations &
complications
Exhibits a factual and/or
conceptual skills to consider
other factors, Managerial
considerations &
complications
Exhibits accurate & detailed
eadth & depth to consider
other factors, Managerial
considerations &
complications
Displays Excellent skills to
consider other factors,
Managerial considerations &
complications
Writing and Presentation
(20 marks) - good academic
writing; - Free of any
grammatical e
ors; using
co
ect sentence structure;
applying an extensive range
of vocabulary; - Proper
introduction and conclusion.
Consistent formatting with
suitable headings and sub-
headings - Consistent use of
Inadequate Academic
Writing and Presentation
skills.
Basic Academic Writing and
Presentation skills,
Exhibits a factual and/or
conceptual skills of
Academic Writing and
Presentation skills
Exhibits accurate and
detailed
eadth and
depth in Academic Writing
and Presentation skills
Displays Excellent Academic
Writing and Presentation
skills
labels, highlights, font
weight and underline
Referencing (10 marks) -
Comprehensive Reference
list - Appropriate
Referencing using HARVARD
guidelines
Inadequate understanding
of Referencing
Basic knowledge only of
Referencing
Exhibits
eadth and depth
of understanding of
developing and using
Referencing
Exhibits accurate & detailed
eadth & depth of
understanding of developing
& using Referencing
Displays Exceptional
Understanding of
developing and using
Referencing
International Review of Business and Economics
XXXXXXXXXXVolume 4, Special Issue No.1, July 2020 XXXXXXXXXX338
53. EFFECTIVE CAPITAL BUDGETING
DECISIONS BY FIRMS
Mr. MANJUNATH M.S., Lecturer, Department of Commerce,Government
First Grade College, N R Pura, Mail: XXXXXXXXXX
Cell: XXXXXXXXXX
Mr. PRAVEEN B, Assistant Professor, Department of Commerce &
Management,PES Institiute of Advanced Management Studies, Shivamogga.
Mail:
XXXXXXXXXX Cell: XXXXXXXXXX
ABSTRACT
Finance is the life blood of business. Finance is said to be the circulatory
system of the economy body, making
possible the required cooperation
etween the innumerable units of
activity. Finance guides and regulates
investment decisions and expenditure
of administers economic activities.
Capital budgeting means planning
for capital assets. Capital budgeting
decisions are complex process of
paramount importance in financial
decisions, because efficient allocation
of capital resources is one of the
most crucial decisions of financial
management. Capital budgeting is
udgeting for capital projects.Because
the long-term profitability of most
enterprises depends on the nature
and quality of their capital project
investments, appropriate planning,
evaluation, and implementation
of high-return capital projects are
imperative. Capital budgeting helps
managers plan for the acquisition of
capital projects that promise high
eturns.
It is a managerial technique of meeting
capital expenditure with the overall
objectives of the firm. The research
findings are expected to be useful to
the financial institutions, managers
as well as practitioners in the area
of investment decision-making.
As there are various methods and
criteria available, the research studies
undertaken so far suggest that by and
large decision-makers tend to select
methods ignoring time value of money.
KEYWORDS
Capital Budgeting, Risk, Capital
Expenditure.
Capital budgeting.:It is decision-
making process concerned with
“whether or not (i) the firm should
invest funds in an attempt to make
profit?” and (ii) how to choose among
competing projects.
Risk:Refers to a situation in which there
are several possible outcomes, each
outcome occu
ing with a probability
that is known to the decision-maker.
Capital Expenditure: A capital
expenditure is an expenditure incu
ed
for acquiring or improving the fixed
assets, the benefits of which are
expected to be received over a number
of years in future.
INTRODUCTION
A number of researchers in finance and
accounting have examined corporate
capital budgeting practices. Many
of these articles survey corporate
managers and report the frequency
with which various evaluation methods,
XXXXXXXXXXISSN: XXXXXXXXXXOnline XXXXXXXXXXPrint)
One Day Online International Conference Organised by IRBE Publications, Denver, USA XXXXXXXXXX
such as payback, internal rate of
eturn (IRR), net present value (NPV),
discounted payback, profitability index
(PI), or average return on book value
are used.
The process of budgeting resources
for the future of an organization’s
long termplans. Capital planning for
a business would include budgeting
for new and replacement machinery,
esearch and development and the
production of new products, new plants
and other major capital expenditures.
Capital budgeting is a managerial
technique of meeting capital
expenditure with the overall objectives
of the firm. There are two fundamental
types of financial decisions that the
finance team needs to make in a
usiness: investment and financing.
The two decisions boil down to how
to spend money and how to bo
ow
money. A business needs to make
investments in various projects. As
a normal practice, a business entity
invests the money in the acquisition of
fixed assets, such as, machinery, land
or building.
OBJECTIVES OF THE STUDY
The following objectives were set out
for the study:
1. To determine the types of capital
investments undertaken and the
methods of appraisal used.
2. To analyze the problems faced to
estimate the cash flows associated with
each capital investment accurately.
3. To analyze how ‘Uncertainty’ in
the future estimates in investment
projects is being taken care of.
4. To study the preferences between
Net Present Value (NPV) and Internal
Rate of Return (IRR) methods.
METHODOLOGY
For the present study descriptive
analysis method is applied and it
is based on the secondary sources
of data which have been collected
from various articles, books, reports,
documents journals, newspaper etc.
Why do firms follow Capital budgeting
decision?
1.Capital budgeting involves capital
ationing
2.Capital budget becomes a control
device when it is employed to control
expenditure
3.A firm contemplating a major capital
expenditure programme