# Corporate Finance #11 Capital Budgeting

Learn how to make capital budgeting decisions from a certified public accountant (CPA)

Language: english

Note: 4.6/5 (62 notes) 24,800 students

Instructor(s): Robert (Bob) Steele

Last update: 2022-02-17

## What you’ll learn

• Explain how to make capital budgeting decisions
• Discuss the common scenarios related to capital budgeting decisions
• Calculate the net present value (NPV) for a capital budgeting decision
• Calculate the internal rate of return (IRR) for a capital budgeting decision
• Calculate the payback period for a capital budgeting decision
• Calculate the modified internal rate of return (MIRR)
• Compare capital budgeting projects

## Requirements

• Basic understanding of corporate finance concepts

## Description

This course will show how to make capital budgeting decisions from a corporate finance perspective.

We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.

Capital budgeting decisions involve planning for projects and future cash flows extending more then one year into the future. The common example of a capital budgeting decision is the decision to purchase a large piece of equipment that will impact future cash flow for multiple years.

The typical format of a capital budgeting decision often includes a cash out flow a time period zero, resulting in cash inflows, or reduced outflows due to increase efficiencies, over multiple years.

Because capital budgeting decisions impact cash flows for multiple years, time value of money concepts are used, including present value of one calculations and present value of annuity calculations.

The primary tools used in capital budgeting decisions are the net present value calculation (NPV) and the internal rate of return calculation (IRR). Both of these tools utilize time value of money concepts, and we will spend a lot of time with them.

We will also discuss the payback period calculation and the modified internal rate of return or (MIRR).

## Course content

• Introduction
• 1205 Capital Budgeting Decision Overview
• 1210 Payback Period
• 1215 Net Present Value (NPV)
• 1220 Internal Rate of Return (IRR)
• 1225 Project Selection Process
• 1230 Modified Internal Rate of Return (MIRR)
• 1235 Fixed Asset Replacement Decision
• Practice Probs. – Capital Budgeting
• OneNote Resource
• 1211 Cash Flow Calculation
• 1213 Cash Flow Impact of Depreciation Due to Taxes
• 1214 Cash Flow Impact of Tax Rate Change
• 1216 Payback Period
• 1217 Payback Period Comparing Projects of Different Length
• 1219 Payback Period Time Value of Money Limitation
• 1220 Net Present Value (NPV) vs Payback Period
• 1221 Internal Rate of Return (IRR) Problem 1
• 1222 Internal Rate of Return (IRR) Problem 2
• 1223 Internal Rate of Return (IRR) Uneven Future Inflows
• 1224 Net Present Value (NPV) With Negative Future Outflow
• 1225 Net Present Value (NPV) With Closing Cost
• 1226 Net Present Value (NPV) Delayed Payments
• 1227 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 1
• 1228 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 2
• 1229 Profitability Index
• 1230 Capital Budgeting with Reinvestment Rate Assumption
• 1231 Modified Internal Rate of Return (MIRR)
• 1234 Net Present Value Changing Discount Rate
• 1235 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 1
• 1237 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 2
• 1238 5 Year MACRS Depreciation, Cash Flow, & Net Present Value
• 1239 7 MACRS Depreciation, 10 Year Cash Flow, & Net Present Value
• 1240 Land & 5 MACRS Depreciation, Cash Flow, & Net Present Value
• 1241 Sales of Depreciated Assets & Tax Impact
• Excel Probs. – Capital Budgeting
• 1211 Cash Flow Calculation
• 1213 Cash Flow Impact of Depreciation Due to Taxes
• 1214 Cash Flow Impact of Tax Rate Change
• 1216 Payback Period
• 1217 Payback Period Comparing Projects of Different Length
• 1219 Payback Period Time Value of Money Limitation
• 1220 Net Present Value (NPV) vs Payback Period
• 1221 Internal Rate of Return (IRR) Problem 1
• 1222 Internal Rate of Return (IRR) Problem 2
• 1223 Internal Rate of Return (IRR) Uneven Future Inflows
• 1224 Net Present Value (NPV) With Negative Future Outflow
• 1225 Net Present Value (NPV) With Closing Cost
• 1226 Net Present Value (NPV) Delayed Payments
• 1227 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 1
• 1228 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 2
• 1229 Profitability Index
• 1230 Capital Budgeting with Reinvestment Rate Assumption
• 1231 Modified Internal Rate of Return (MIRR)
• 1234 Net Present Value Changing Discount Rate
• 1235 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 1
• 1237 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 2
• 1238 6 Year MACRS Depreciation, Cash Flow, & Net Present Value
• 1239 7 MACRS Depreciation, 10 Year Cash Flow, & Net Present Value
• 1240 Land & 5 MACRS Depreciation, Cash Flow, & Net Present Value
• 1241 Sales of Depreciated Assets & Taxes Impact
• 1242 5 Year MACRS Depreciation, WACC, Cash Flow, & Net Present Value
• 1243 Buy New Fixed Asset or Keep Old Decision

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