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Capital Budgeting decisions for drug manufacturing company

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Some capital-budgeting choices require managers to decide between upgrading high-technology research equipment and not upgrading.

Respond to the following questions:

1) How would financial managers at a drug manufacturing company use discounted-cash-flow models in their decision-making process?

2) If the equipment is not replaced, what would be the impact on future operating cash flows used in the model?

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Your tutorial is 255 words and includes a small excel net present value model to give you a "visual" on how this works.

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1) How would financial managers at a drug manufacturing company use discounted-cash-flow models in their decision-making process?

The decision to upgrade to high-technology research equipment would involve estimating the costs that would go away (or new revenue earned) if you acquired the equipment and the new costs that would be incurred with the new equipment. This would yield an expected "cash flow" for future periods as a ...

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Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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