Self-Study
5
Overview
Finance
There are no prerequisites.

Course Description

One of the most significant debates that the management team of a business can engage in is whether to spend funds on capital items or other activities. These capital items may involve increases in the productive capacity of a business, an investment in a new corporate headquarters, or perhaps a government-mandated installation of pollution controls. Some investments may be short-term in nature and not involve fixed assets, such as investments in a marketing campaign, product research, or employee training. There may be dozens or even hundreds of prospective investment proposals being forwarded from all over a business. The typical organization will have varying amounts of cash available to invest in these items, so the management team must have a system for determining which investments to make and which to avoid.

Capital Budgeting describes how requests for capital investments are documented and examined. It also covers the primary methods for determining whether a proposed investment is acceptable, as well as a number of strategic considerations. Lease or buy financing options are also discussed, along with a system of capital budgeting controls, giving you and your organization valuable knowledge on capital expenditures.



Instructor

Steven M. Bragg, CPA

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 70 business books. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast.

Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and an auditor with Deloitte & Touche. He holds an MBA from Babson College, a Master of Finance from Bentley College, and a BA from the University of Maine (summa cum laude).



Course Specifics

Finance
Nov 28, 2017
There are no prerequisites.
SS3158019
97
None


Compliance Information

103220
Qualifies for CA Fraud: No


Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Recognize the alterations available for improving an investment proposal, why sunk costs are excluded from proposals, and the alternatives for capital rationing.

Chapter 2

  • Identify the market conditions in which different types of investments and investment decisions will be made.

Chapter 3

  • Cite the basis for discounted cash flow analysis, and how net present value can be used.

Chapter 4

  • Identify the elements of the cost of capital, and note how the cost of capital is calculated.

Chapter 5

  • Recognize the derivation of throughput, the best ways to improve financial results, and situations in which local optimization is occurring.

Chapter 6

  • Recognize the uses to which payback, real option, and complex environment analysis can be used to review investment proposals.

Chapter 7

  • Note the concepts involved in the lease or buy decision process, and the information to include in or exclude from the decision.

Chapter 8

  • Identify the issues to be verified as part of the analysis of a capital budgeting request form.


Table of Contents

Chapter 1 – Overview of Capital Budgeting

Learning Objectives

Introduction

Overview of Capital Budgeting

The Capital Budgeting Application Form

Capital Expenditure Proposal Analysis

Capital Budgeting Problems

Opportunity Costs

Sunk Costs

Excessive Optimism

Capital Rationing

Capital Budgeting in a Budget Format

Capital Budgeting in the Absence of a Budget Model

Capital Budgeting with Minimal Cash

The Post Installation Review

Summary

Chapter 1 – Review Questions

Chapter 2 – Capital Budgeting Strategy

Learning Objectives

Introduction

Capacity Expansion Strategy

Capacity Reduction Strategy

Risk Levels

Additional Risk Factors for International Investments

Factors Impacting Future Asset Usage

Perceived Certainty of Future Demand

Duration

Impact of Financing Alternatives

Summary

Chapter 2 – Review Questions

Chapter 3 – Discounted Cash Flow Analysis

Learning Objectives

Introduction

Cash Flows

Time Value of Money

Present and Future Value Tables

Net Present Value

Scenario and Sensitivity Analysis

Internal Rate of Return

Incremental Internal Rate of Return

Terminal Value

Profitability Index

The Tax Rate

Cash Flow Analysis Issues

Summary

Chapter 3 – Review Questions

Chapter 4 – The Cost of Capital

Learning Objectives

Introduction

Cost of Capital Derivation

Cost of Debt

Cost of Preferred Stock

Cost of Common Stock

Weighted Average Cost of Capital

Variations in the Cost of Capital

Adjustments to the Cost of Capital

Cost of Capital as a Threshold Value

Summary

Chapter 4 – Review Questions

Chapter 5 – Constraint Analysis

Learning Objectives

Introduction

The Bottleneck Operation

Constraint Analysis

The Inventory Buffer

Buffer Sizing

Sprint Capacity

Local Optimization

Investment Decision Priorities

Priority 1 – Increases Throughput

Priority 2 – Reduces Invested Funds

Priority 3 – Reduces Expenses

Additional Investment Considerations

The Constraint Analysis Model

Production Analysis

Increase Downstream Capacity

Increase Upstream Capacity

Increase Upstream Processing

Outsource to a Supplier

Summary

Chapter 5 – Review Questions

Chapter 6 – Other Capital Budgeting Analyses

Learning Objectives

Introduction

Breakeven Analysis

The Payback Method

Discounted Payback

Accounting Rate of Return

Real Options

The Outsourcing Decision

Research and Development Funding Analysis

Complex Systems Analysis

Summary

Chapter 6 – Review Questions

Chapter 7 – The Lease or Buy Decision

Learning Objectives

Introduction

The Lease Arrangement

The Lease or Buy Decision

Leasing Concerns

Leasing Advantages

Summary

Chapter 7 – Review Questions

Chapter 8 – Capital Budgeting Controls

Learning Objectives

Introduction

Capital Budgeting Controls

Summary

Chapter 8 – Review Questions

Review Question Answers and Rationales

Glossary

Index

Final Examination

Answer Sheet

Course Evaluation



Choose Your Preferred Format


Online Access

Get immediate access to a robust collection of learning and reference materials, allowing you to dive deep into the information you need. Our self-study materials are authored by top-quality, industry experts who focus on helping you grasp concepts quickly using real-life examples. Download your CPE to any device, and take it with you so you can learn when and wherever you want. Complete your CPE with an online exam, and enjoy instant grading with the option to print your certificate immediately upon passing.

online access
Hard Copy

Our self-study materials are authored by top-quality, industry experts. You’ll receive a bound notebook of all the course materials, shipped to you within one business day. In addition, you’ll also have full online access. Each self-study package includes a robust collection of learning and reference materials to help you cover the information efficiently and put it into practice immediately.

hard copy
Self-Study Video

Experience high-quality instruction with our Self-Study Videos, available to you 24/7. With more than 80+ videos currently in the Western CPE Self-Study Video library, you can see and hear our expert instructors deliver the information you need in a dynamic way that allows you to immediately apply your learning. Unlike a live course or webcast, you can complete the course on your own time, playing and pausing as needed. Self-Study Videos allow you to complete your CPE requirements on your own time.

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