# Corporate Finance 11 Capital Budgeting

Learn how to make capital budgeting decisions from a certified public accountant (CPA)

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## Corporate Finance 11 Capital Budgeting

### What you’ll learn

Explain how to make capital budgeting decisions
Discuss the common scenarios related to capital budgeting decisions
Calculate the net present value (NPV) for a capital budgeting decision
Calculate the internal rate of return (IRR) for a capital budgeting decision
Calculate the payback period for a capital budgeting decision
Calculate the modified internal rate of return (MIRR)
Compare capital budgeting projects

### Requirements

Basic understanding of corporate finance concepts

### Description

This course will show how to make capital budgeting decisions from a corporate finance perspective.We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.Capital budgeting decisions involve planning for projects and future cash flows extending more then one year into the future. The common example of a capital budgeting decision is the decision to purchase a large piece of equipment that will impact future cash flow for multiple years.The typical format of a capital budgeting decision often includes a cash out flow a time period zero, resulting in cash inflows, or reduced outflows due to increase efficiencies, over multiple years.Because capital budgeting decisions impact cash flows for multiple years, time value of money concepts are used, including present value of one calculations and present value of annuity calculations.The primary tools used in capital budgeting decisions are the net present value calculation (NPV) and the internal rate of return calculation (IRR). Both of these tools utilize time value of money concepts, and we will spend a lot of time with them.We will also discuss the payback period calculation and the modified internal rate of return or (MIRR).

### Overview

Section 1: Introduction

Lecture 1 1205 Capital Budgeting Decision Overview

Lecture 2 1210 Payback Period

Lecture 3 1215 Net Present Value (NPV)

Lecture 4 1220 Internal Rate of Return (IRR)

Lecture 5 1225 Project Selection Process

Lecture 6 1230 Modified Internal Rate of Return (MIRR)

Lecture 7 1235 Fixed Asset Replacement Decision

Section 2: Practice Probs. – Capital Budgeting

Lecture 8 OneNote Resource

Lecture 9 1211 Cash Flow Calculation

Lecture 10 1213 Cash Flow Impact of Depreciation Due to Taxes

Lecture 11 1214 Cash Flow Impact of Tax Rate Change

Lecture 12 1216 Payback Period

Lecture 13 1217 Payback Period Comparing Projects of Different Length

Lecture 14 1219 Payback Period Time Value of Money Limitation

Lecture 15 1220 Net Present Value (NPV) vs Payback Period

Lecture 16 1221 Internal Rate of Return (IRR) Problem 1

Lecture 17 1222 Internal Rate of Return (IRR) Problem 2

Lecture 18 1223 Internal Rate of Return (IRR) Uneven Future Inflows

Lecture 19 1224 Net Present Value (NPV) With Negative Future Outflow

Lecture 20 1225 Net Present Value (NPV) With Closing Cost

Lecture 21 1226 Net Present Value (NPV) Delayed Payments

Lecture 22 1227 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 1

Lecture 23 1228 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 2

Lecture 24 1229 Profitability Index

Lecture 25 1230 Capital Budgeting with Reinvestment Rate Assumption

Lecture 26 1231 Modified Internal Rate of Return (MIRR)

Lecture 27 1234 Net Present Value Changing Discount Rate

Lecture 28 1235 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 1

Lecture 29 1237 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 2

Lecture 30 1238 5 Year MACRS Depreciation, Cash Flow, & Net Present Value

Lecture 31 1239 7 MACRS Depreciation, 10 Year Cash Flow, & Net Present Value

Lecture 32 1240 Land & 5 MACRS Depreciation, Cash Flow, & Net Present Value

Lecture 33 1241 Sales of Depreciated Assets & Tax Impact

Section 3: Excel Probs. – Capital Budgeting

Lecture 34 1211 Cash Flow Calculation

Lecture 35 1213 Cash Flow Impact of Depreciation Due to Taxes

Lecture 36 1214 Cash Flow Impact of Tax Rate Change

Lecture 37 1216 Payback Period

Lecture 38 1217 Payback Period Comparing Projects of Different Length

Lecture 39 1219 Payback Period Time Value of Money Limitation

Lecture 40 1220 Net Present Value (NPV) vs Payback Period

Lecture 41 1221 Internal Rate of Return (IRR) Problem 1

Lecture 42 1222 Internal Rate of Return (IRR) Problem 2

Lecture 43 1223 Internal Rate of Return (IRR) Uneven Future Inflows

Lecture 44 1224 Net Present Value (NPV) With Negative Future Outflow

Lecture 45 1225 Net Present Value (NPV) With Closing Cost

Lecture 46 1226 Net Present Value (NPV) Delayed Payments

Lecture 47 1227 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 1

Lecture 48 1228 Net Present Value (NPV) vs Internal Rate of Return (IRR) Prob. 2

Lecture 49 1229 Profitability Index

Lecture 50 1230 Capital Budgeting with Reinvestment Rate Assumption

Lecture 51 1231 Modified Internal Rate of Return (MIRR)

Lecture 52 1234 Net Present Value Changing Discount Rate

Lecture 53 1235 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 1

Lecture 54 1237 MACRS Depreciation, Cash Flow, & Net Present Value Prob. 2

Lecture 55 1238 6 Year MACRS Depreciation, Cash Flow, & Net Present Value

Lecture 56 1239 7 MACRS Depreciation, 10 Year Cash Flow, & Net Present Value

Lecture 57 1240 Land & 5 MACRS Depreciation, Cash Flow, & Net Present Value

Lecture 58 1241 Sales of Depreciated Assets & Taxes Impact

Lecture 59 1242 5 Year MACRS Depreciation, WACC, Cash Flow, & Net Present Value

Lecture 60 1243 Buy New Fixed Asset or Keep Old Decision