Discuss capital budgeting and bond refunding.
CAPITAL BUDGETING ANALYSIS
Capital budgeting analysis is the process of evaluating investments in capital assets or those assets that have expected cash flow benefits for more than one year. The main focus of the analysis is determining whether the expected future benefits/cash flows are adequate to compensate initial investment. It is therefore basically a question of the worth of an investment. The worth is expressed in terms of the future cash flows that are discounted to the present and compared to the initial investment.
The analysis involves the following procedures:
1. Gathering information about the investment
Before even making computations, the analyst must be familiar with the project, the surrounding circumstances, its importance to the company's operations, factors that may contribute or hinder its possible success, and other relevant qualitative information that may affect a decision.
2. Generating possible options or alternatives
A proposed investment is basically thought of ...
The solution discusses capital budgeting and bond refunding for Proctor and Gamble.