Corp.finance 1: Capital budgeting (hoạch định ngân sách vốn đầu tư)

* Role, meanings
- liên quan tới cơ cấu tài sản & cơ cấu vốn <=> ảnh hưởng đến toàn bộ hoạt động của DN

* Steps of capital budgeting: 

1. generating idea
   
2. analyzing individual proposal
   
3. planning the capital budgeting
   
4. monitoring & post-auditing
   

* Projects categories

1. Replacement project
2. Expansion project
3. New products & services
4. Regulatory, safety & environmental projects
5. Other, eg. "pet" project
   

* Principles

1. Based on CASH FLOW, not ACCOUNTING concepts
2. Timing of CF is crucial
3. CF based on OPPORTUNITY COSTS
4. CF are analyzed on an AFTER-TAX basis
   
5. Financial costs are IGNORED
   
6. Capital budgeting CF are NOT accounting Net Income (similar to (1), smaller)

* Some key words in capital budgeting

1. sunk cost
2. opportunity cost
3. an incremental cash flow
4. externality
5. conventional & nonconventional

* Some projects challenging capital budgeting

1. independent & mutually exclusive projects
2. project sequencing: "period" projects
3. unlimited fund & capital rationing
   

* Measure investment performance

1. NPV - Net Present Value
   
2. IRR - Internal Rate of Return
   
3. PB - Payback period
4. DPB - Discounted payback period
5. AAR - Average Accounting Rate of Return
6. PI - Profitability Index

* Notes

• NPV profile (<=> NPV shape)
• Prob with IRR: no IRR & multiple IRR
• when NPV & IRR are contrast: use NPV (natural: based on discount rate)