While you are preparing your master budget, you notice one of your managers has included two potentially
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Question:
While you are preparing your master budget, you notice one of your managers has included two potentially large capital expenditures over the next few years. Although you won't be doing a thorough analysis of these types of expenditures until further on in the budgeting process , you would like to get an idea of how it will affect her departmental budget next year. Assume only one of the capital expenditures will be chosen to be funded.
- If the projects both cost the same, but the cash flows from the first is spread evenly over the next five years, and the cash flows from the second option start low and grow over time, how might this affect the decision to pick one over the other from a time value of money perspective?
- What questions might you want to ask the manager to get a clearer idea of the income potential of each of the two projects?
Related Book For
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright
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