Capital budgeting process

Free IMA CMA Part 2 (Strategic Financial Management) lesson in Capital Investment Decisions. 13 min read, ~1,999 words.

The six stages: identify, screen, evaluate (DCF), select, implement, postaudit. After-tax operating cash flow = (Revenue − Cash Expense)(1 − t) + (Depreciation × t). The second term is the depreciation tax shield. Relevant cash flows are incremental, after-tax, opportunity-cost-inclusive; sunk costs are excluded. Initial NWC investment is a cash...