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Capital Budgeting and TVM in IT Management

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Lets say that the IT department of your company has begun to appreciate that its projects do not exist in a business vacuum. That is, your company must also commit resources to operations, shareholder returns, and non-IT projects for short- and long-term durations. It is therefore necessary to assess project risks from a financial standpoint before committing to a project.

Discuss capital budgeting and time value of money (TVM). can you explain why time value of money is important to capital budgeting. Analyze potential financial investment risks, and explore the relevance of the capital asset pricing model (CAPM) in determining portfolio risks.

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I am supplying a general answer here.

- Discuss capital budgeting and time value of money (TVM).

Capital budgeting assesses value of long-term investments and if those investments or projects are worth the return value for the organization. Capital budgeting is a process to determine which long term projects to take on and if they are expected to generate cash flows sufficient to make the investment worthwhile. Cash flows analyzed include those generated by the project and those used by the project. It also includes consideration of the time value of money and consideration of all mutually exclusive projects available.

Time value of money is concerned with the value of money today. Next, how those funds could be valued in the future. Then choosing the best way to improve that value in the future. The right choices depends on the rate of return, which can be gained from the ...

Solution Summary

Using information supplied, a review of the meaning of capital budgeting and time value of money and risks of investments. 574 words with references.