Capital Budgeting Proposal Analysis Methods
This is considered the simplest but least accurate technique to analyze a capital budgeting proposal
What is the payback method
This decision occurs after the project has been approved and involves how the asset will be acquired
What is the buy or lease decision
What is when a company successfully bids to assume control of another company
What is a takeover
Which merger was viewed as the worst merger in history and lost almost $200 billion of shareholder’s money?
What is AOL and Time Warner
Capital budgeting projects with a legal requirement or when a company wants to mitigate this
What is a high-risk situation
This method of analysis says that any project ending in the positives should be accepted
What is the net present value method
This decision tasks management with deciding if a fixed asset should be purchased
What is the capital budgeting decision
What is when two or more entities combine to form one larger entity
What is a merger
Which merger lost more than $35 billion after merging?
What is Vodafone and Mannesmann
What causes a problem when both cultures are flawed?
What is a culture clash?
This method focuses on prioritizing projects that improve the throughput of a process
What is the constraint or bottleneck method
This decision brings an alternative to purchasing and using an asset in-house
What is the outsourcing decision
What is distracted management from the task of making money
What is loss of focus on customers
What pharmaceutical companies merged for over $160 billion but in 15 years they lost $40 billion of shareholder wealth?
What is Glaxo Wilcome and SmithKline Beechman
From the perspective of constraint management, the only capital investments that should be made in a business are ones that will either increase throughput or reduce these
What are operating expenses
If using this method, an itemization of cash flows involved in the purchase is standard on the capital budgeting application form
What is the constraint or bottleneck method
This decision determines what method is used to rank the capital budgeting proposals
What is the priority decision
What is it called when senior management rises to the top immediately afer a frenzy
What is the wrong management rises to the top
What percentage of mergers and takeovers are unsuccessful?
What is 83%
why does management not want to find dirty laundry during a TOM?
What is to avoid having to restart the process?
By cause of this method, a block may be added on the capital budgeting application form that showcases future cash flows and a hurdle rate
What is the net present value method
This decision made by the controller as part of the capital budgeting review process examines capital budgeting decisions after the fixed asset is implemented and determines if any changes need to be made
What is the post-installation review process
What causes salary costs to rise
What are severance packages and salary incentives
Are mergers done offensively or defensively?
What is defensively
A large fixed asset around which the rest of the production area is configured
What is a monument