Imagine you are a representative of management for Google and you must make a capital budgeting decision. The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year's profits. You are charged with describing the important considerations in the decision-making process to upper management. In your response, be sure to include the following:
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
An explanation of how these factors are significant to the company.
A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
A calculation of the proposed return on investment based on criteria you select and justification for that ROI.
Develop a 200 - 250 word explanation supporting your recommendations.
tip: For help with reading an annual report access this handy guide from Moneychimp (http://www.moneychimp.com/articles/financials/fundamentals.htm)
Also part 2
Using the annual report and other sources such as a 10k or 10q's, discuss the dividend policy of your company.
Answer the following questions as part of your response:
How would you describe Google's dividend policy?
Why do you believe this company chose the dividend policy they have in place?
Do you agree or disagree that they have selected the best dividend policy for the company?
How might this dividend policy function in both perfect and imperfect capital markets?
Calculate the dividend rate over the past 5 years. Define why you believe that it has or has not changed over the last 5 years.
Support your position with evidence from the text or external sources.
A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision. An explanation of how these factors are significant to the company.
Capital budgeting decision refers to the decision relating to capital allocation and deciding the composition of the assets of the company. It is very important for firm's future as it involves huge capital expenditure. Some important factors that were considered when making this capital budgeting decision are:
1) It should enhance the wealth of the investors.
2) It should satisfy the objectives of all the stakeholders.
3) It should take care of environmental concerns and help in satisfying the people involved with the project.
4) It should be executed within the schedule fixed by the company.
For Google, it can be very important project as it ...
Solution helps in providing a description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision