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capital_planning_cycle_gp.pptxCapital planning cycle
Eugene Douglass
Tiffany Simons
Angeline Petion
AIU Online
1
Introduction
A capital plan analyze all the expected projects to be carried out by the UPC Company for a period of 10 years given the amount of $100 million is to be used for the projects.
A workable plan should be developed in order to ensure the set budget is met and proper use of the funds.
Any additional funds needed would be obtained from the sale of fleet of trucks.
2
Capacity condition and need assessment
For proper implementation of the capital plan, the company management team should have a well drawn plan for each project extent and the conditions necessary for the project to be successful.
Different projects require differing needs and thus the company should have a well established requirements for each project to be undertaken.
This stage takes care of the various projects requirement in advance before the start of the capital plan.
3
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Having clear knowledge of the needs of each specific project makes easy for the projects to deliver as expected.
It make available all the skilled man power for the expected projects and the resources.
Project proposal discussions and management
Capital plan project proposal entails giving the summary of the proposed projects to be carried out.
UPC Company intends to maintain competitive in the market.
The objectives of undertaking the projects would be to improve the company products and services provided.
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Management is obligated to undertake project monitoring during the 10 year capital plan.
The company capital structure is 30% debt and 70% equity, hence for future funding, the company may decide to issue its shares to the public or borrow.
Capital project submission
Budget estimates for the proposed capital project plan are presented to the board for evaluation.
Management ensures the budget has taken care of all that would be required to carry out the projects
Estimates made should be approved so as to avoid over or under utilization of the available resources.
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For external financing, the company should have well submitted outline of the source of fund.
The effect of such borrowings should also be known in advance and proper measures to mitigate the company from facing a downfall put in place.
Financial analysis of the project
Financial analysis of the capital project would help in knowing if the projects would be beneficial to the company or not.
Total costs involved by all the projects would be compared with the total benefits of the same projects.
Using the capital budgeting techniques, it is possible to determine if the projects would be profitable to the company or not.
Conclusion
The purpose of the capital plan should be derived at the end of the 10 year period, therefore all the stages involved in capital planning cycle need to be integrated.
The achievement of every stage depend on the previous stage of the cycle and therefore proper care should be implemented when developing a capital plan.
Reference
Bizfillings. (2012, May 24). Bizfillings. Retrieved from Financial analysis of major projects: http://www.bizfilings.com/toolkit/sbg/finance/cash-flow/major-project-financial-analysis.aspx
Investopedia. (2015). Investopedia. Retrieved from Complete Guide To Corporate Finance: http://www.investopedia.com/walkthrough/corporate-finance/4/project-analysis/break-even.aspx
Sherman, A. J. (2005). Raising capital: Get the money you need to grow your business. New York: AMACOM.
