Business discussion Factors in Capital Budgeting Decisions

Business discussion

Factors in Capital Budgeting Decisions

Imagine you are a representative of management in the company you have selected for your Week Six assignment and you must make a capital budgeting decision.  The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management.  In your response, be sure to include the following:

·         A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.

·         An explanation of how these factors are significant to the company.

·         A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.

·         A calculation of the proposed return on investment based on criteria you select and justification for that ROI.

Develop a 200 – 250 word explanation supporting your recommendations.

Tip: For help with reading an annual report access this handy guide from Money Chimp (Links to an external site.)

(http://www.moneychimp.com/articles/financials/fundamentals.htm)