Sign In
Not register? Register Now!
Essay Available:
Pages:
8 pages/β‰ˆ2200 words
Sources:
5 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 50.54
Topic:

Budgeting Signature Assignment. The Risk Factor of Capital Budgeting

Research Paper Instructions:

The topic should be related to Budgeting area. The paper is expected to be 8 to 10 pages long (not including the title page, table of contents, references, and any appendices).
As a new MBA finance wizard, I want to show my vast knowledge of budgeting by providing a discussion regarding the concepts of budgeting to the new hires.
The concepts of budgeting, these concepts include: evaluation of basic risk adjustment techniques in capital budgeting, measuring risk management in project finance, the cost of capital, identifying capital budgeting techniques examining their effects on corporate strategy of investment selection
In addition to the concepts above, I am going to address the following:
Measuring Investment Value and Analyzing processes in foreign investments
Illustration of decision making using behavioral finance for capital budgeting
Evaluating the ethical considerations in the practice of finance

Module 1: Understanding Capital BudgetingRequired Readings:Asquith, P., & Weiss, L. A. (2016). The time value of money: Discounting and net present values. In Lessons in corporate finance: A case studies approach to financial tools, financial policies, and valuation (pp. 328-344). Hoboken, NJ: John Wiley & Sons, Inc. Merrick, K. O. (2017, February 23). How simple math can change your life. Retrieved from https://www(dot)forbes(dot)com/sites/kristinmerrick/2017/02/23/how-simple-math-can-change-your-life/#11bc23b677f4Videos:Hillier, E. (2017, December 8). EMT320 W1: Simple and compound interest [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=sBv5Xsq2h-o (8:11).Takota Asset Management. (2015, September 2). Simple vs. compound interest [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?time_continue=9&v=gyiiqUQgEeA (4:20).West Virginia Central Credit Union. (2016, June 8). Simple interest vs. compound interest [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?time_continue=13&v=cSZYJLSkPBU (2:23).Module 2: Measuring Investment ValueRequired Readings :Asquith, P., & Weiss, L. A. (2016). Valuation and cash flows (Sungreen A). In Lessons in corporate finance: A case studies approach to financial tools, financial policies, and valuation (pp. 345-362). Hoboken, NJ: John Wiley & Sons, Inc. Optional Readings Baresa, S., Bogdan, S., & Ivanovic, Z. (2016). Capital investments and financial profitability. UTMS Journal of Economics, 7(1), 49-59. Turner, J. A. (2016). Net operating working capital, capital budgeting, and cash budgets: A teaching example. American Journal of Business Education (AJBE), 9(1), 31. doi:10.19030/ajbe.v9i1.9575 VideosHillier, D. (2014, April 2). Capital budgeting analysis: What cash flows should you use? [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=5w1m87pWBqM (23:04)Module 3: Analyzing Foreign InvestmentsRequired Readings:Marinescu, N. (2016). Greenfields and acquisitions: A comparative analysis. Bulletin of the Transilvania University of Brasov. Economic Sciences. Series V, 9(1), 295-300. Videos:Malik, M. (2017, September 17). Greenfield vs brownfield project & investment [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=bcEOggmnuHs (10:21)TrajectorE. (2017, November 26). Greenfield v brownfield Part 2: Engineering [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=SSIyxtoqk8g (4:01)TrajectorE. (2017, September 25). Greenfield v brownfield Part 1: Objectives [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=QxBxO76gEZo (2:38)TrajectorE. (2018, January 25). Greenfield v brownfield Part 3: Construction [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=7enOCgWXOb0 (3:05)Module 4: Risk Adjustment TechniquesBaker, H.K. & English P.  Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects. Hoboken, N.J: Wiley; 2011. Optional ReadingsGitman, L. J., & Forrester, J. R., Jr. (1977). Forecasting and evaluation: Practices and performance. Financial Management (Pre-1986), 6(3), 66. Videos1. Three approaches to value at risk (VaR) - https://www(dot)youtube(dot)com/watch?v=L2xzlvhkagk&feature=relmfu2. Introduction to Risk and Return - https://www(dot)youtube(dot)com/watch?v=xAWxKk9tUMEModule 5: Risk Management1. Mun, J. (2006). Modeling Risk : Applying Monte Carlo Simulation, Real Options Analysis, Forecasting, and Optimization Techniques. Hoboken, N.J.: John Wiley & Sons.  Optional Readings 1. Boatman, K. (2008). A capital budgeting approach to foreign direct investment. The Journal of Applied Business and Economics, 8(4), 24-33. 2. Shao, L. P., & Shao, A. T. (1996). Risk analysis and capital budgeting techniques of U.S. multinational enterprises. Managerial Finance, 22(1), 41-57. Module 6: Cost of CapitalReading and Background Material1. Booth, L. D. (1980). Stochastic demand, output and the cost of capital: A clarification. Journal Of Finance, 35(3), 795-798. 2. Cost of capital. (2004, Oct 07). Financial Times. 3. Pratt, S. P., & Grabowski, R. J. (2008). Cost of Capital : Applications and Examples. Hoboken, N.J.: John Wiley & Sons. (Please read pages 3-7). Videos 1. Cost of Capital Part 1 - https://www(dot)youtube(dot)com/watch?v=__2hSG7OxlA2. Cost of Capital Part 2 - https://www(dot)youtube(dot)com/watch?v=psSXPgGnynw3. Cost of Capital Part 3 - https://www(dot)youtube(dot)com/watch?v=131UajqBAloModule 7: Behavioral FinanceReading and Background MaterialRequired ReadingsPerren, M., Faseruk, M., & Cooper, T. (2015). Making sense of behavioral finance. Journal of Business Diversity, 15(1), 14-22. Park, K., & Jang, S. (2014). Hospitality finance and managerial accounting research: Suggesting an interdisciplinary research agenda. International Journal of Contemporary Hospitality Management, 26(5), 751-777. Optional VideosCrosby, T. (2012, September 27). Behavioral finance [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=s3H7-Z0Qkb4 (18:09)Gulseth, M. (2012, October 23). Behavioral finance [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=ZcJPwk5gRwY (2:20) Module 8: Ethics in FinanceReading and Background MaterialRequired Readings Oates, G., & Dias, R. (2016). Including ethics in banking and finance programs: teaching “we shouldn’t win at any cost”. Education + Training, 58(1), 94-111. doi:10.1108/et-12-2014-0148 Optional video:McMillan, M. G. (2016, December 4). Ethical dilemmas - how to do the right thing, even when no-one is watching [Video file]. Retrieved from https://www(dot)youtube(dot)com/watch?v=-gidRYSQ8JA (59:18)

Research Paper Sample Content Preview:

The concepts of budgeting
Student`s Name
Institutional Affiliation
The Risk Factor of Capital Budgeting
The increase in volatility of the global economy forces investors to make use of the capital budget when choosing their investments. A capital budget is a plan for the long-term investment of the assets such as machinery and the buildings. With these investments, the risk is inevitable. Some of the risks involved comprise the management sinking the invested funds in risky projects, the risk of the investee company collapsing and failure to pay the cash flows in time as per the agreement. Valuing long-term business investment can be challenging due to various uncertain factors to put into consideration. Capital budgeting can be used to compare projects. Normally, against the risk, the business person needs a premium over and above the existing one which is risk-free. Therefore, the more uncertain the future return will be, the more the risk and the greater the premium and the vice-versa.
Consequently, the risk premium gets introduced in decisions in capital budgeting with the help of the discount rate. Future cash flows are discounted due to the needed rate of return for the project. Investors can minimize losses by incorporating risk in capital budgeting (Bierman & 2012). 
Risk premium - the investors, by all means, try to avoid risk. Increasing returns for risky projects as compared to less risky investments is one of a way of encouraging investors to invest in such risky projects. A risk premium refers to a rate of discount that is added to the risk-free rate borrowing.
The risk occurs in investment evaluation since it is not possible to anticipate the occurrence of the possible future events with consequently and certainty. It is also not possible to make any accurate predictions to the cash flow sequence. As such, risk associated with the project is defined as the variability that is expected to take place in future returns from the project. The project becomes riskier with an increase in the variability of the expected returns. Coefficient variation and standard deviation can be used to measure the risk (Saita, 2010). 
Identifying capital budgeting techniques, examining their effects on corporate strategy of investment selection
Capital budgeting techniques are used to evaluate the feasibility of long-term investments. As such, decisions regarding capital budgeting are one of the vital financial decisions that relate the choice of the investment proposal or the line of action that will produce benefits in the future over the existence of the project. Both modern and traditional budgeting techniques are used by the organizations to make a judgment on the feasibility of these projects. The modern method involves discount criteria whereby the time value of money is considered while the traditional method depends on the non-discount criteria that never put time value of the money into consideration. Modern technique methods include Profitability Index, Internal Rate of Return, Modified Internal Rate of Return and the Net Present Value Method. On the other hand, traditional technique methods include the Average Rate of Return and the Payback Period Method (Hasan, 2013).
Payback method: Pay...
Updated on
Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:
Order

πŸ‘€ Other Visitors are Viewing These APA Research Paper Samples:

HIRE A WRITER FROM $11.95 / PAGE
ORDER WITH 15% DISCOUNT!
Order Now