I-18
CONTENTS PAGE
u Taxation and cash flows
168
u Depreciation, non-cash items and cash flows
168
u Treatment of Depreciation and Profit/Loss on Sale/Scrapping of an Asset
168
u Financial Cash Flows
169
u Cash flows from the point of view of different perspectives
171
STUDENTS ACTIVITIES
171
Points to remember
171
Graded illustrations
172
Objective type questions
177
Multiple choice questions
177
Assignments
179
Problems
179
7
CAPITAL BUDGETING - TECHNIQUES OF EVALUATION
u Evaluation of Proposals : The Background
182
u Capital Budgeting : Techniques of Evaluation
182
u Traditional or Non-discounting Techniques
182
- Payback Period - Accounting Rate of Return or Average Rate of Return (ARR) u Discounted Cash Flows or Time-Adjusted Techniques
182 184 186
- Discounting Procedure : A common ingredient to Discounted cash flow techniques - Net Present Value (NPV) Method - Profitability Index (PI) - Terminal Value (TV) - Discounted Payback Period - Internal Rate of Return (IRR) - Modified Internal Rate of Return u Capital Budgeting Decisions : Some Cases
186 187 189 190 192 192 198 199
u Capital Budgeting and Break-Even Analysis
206
u Selecting the Appropriate Technique
208
STUDENTS ACTIVITIES
209
Points to remember
209
Graded illustrations
209
Advanced problems on capital budgeting
228
Capital budgeting problems based on block of assets concept
233
Students activities
238
Objective type questions
238
Multiple choice questions
238
Assignments
241
Problems
241
8
CAPITAL BUDGETING - SOME ISSUES
u Capital budgeting under capital rationing
247
u Single period capital rationing
248
