Factors in Capital Budgeting Decisions
Imagine you are a representative of management in the company you have selected for your Week Six assignment 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 Money Chimp (Links to an external site.)