BUS650 Managerial Finance WK 5

Week 5 Guidance

Discussion 1: Factors in Capital Budgeting Decisions

This is another applied discussion as you imagine you are a financial representative of the firm you have selected for your final project. Customers have been complaining about the

lag time between order and delivery, and you are justifying a new computer system that

will cost 10% of last year’s profits. Notice that the cost is 10% of last year’s profit, not 10% of last year’s revenue. Include all four aspects listed in making capital decisions. Think, as well, as how you will justify this decision to upper management leaders.

Net present value, internal rate of return, payback, and profitability index all factor u sed in capital budgeting decisions. Of these four, which is considered the most reliable in the

corporate decision making process regarding growth and expansion? While some of you

are in the position of making these types of financial decisions for your or ganization, others

are new to this responsibility. These types of discussions are great vehicles to explore each others’ approaches to solving this very real customer problem. Be respectfully critical in

assessing at least two other classmates’ solutions a nd presentations. Include sources to

justify your views.

Discussion 2: Assessing Dividend Policy

Again, you are to examine your selected firm’s dividend policy with a critical eye. Answer

all five questions in your initial post. Use the firm’s annual rep ort and other research to find the information about dividends. Include at least one source in your initial post. Thought

patterns in the financial markets are that dividends matter. Many investors think that this

shows that the firm is doing well and has confidence in the future of the company. But then

why do many firms do well as far as stock price, yet not pay dividends. Apple, for years, never paid dividends, as they used the income to grow the company.

Journal: Capital Budgeting and Dividend Policy

How are decisions made where to invest capital? Many of these decisions may be political.

All stakeholder interests should be considered, but some interests will be more persuasive

than others. Does the CEO or CFO have pet projects in which they are personally and professionally invested? How much of an uphill battle are you willing to make on projects

that are needed but may be unpopular with some stakeholders?

How involved are all stakeholders in the financial decisions of the company. Do they merely look at historical decisions? And, do they have enough confidence in the firm’s decision - makers to continue being a stakeholder?