Тема 4. Вступ до розуміння часової вартості грошей.

3. The essence of the capital budgeting

Chief determinant of what a company will become is the invest­ments it makes today. The generation and evaluation of creative invest­ment proposals is far too important a task to be left to finance specialists; instead, it is the ongoing responsibility of all managers throughout the organization. In well-managed companies, the process starts at a strate­gic level with senior management specifying the businesses in which the company will compete and determining the means of competition. Operating managers then translate these strategic goals into concrete action plans involving specific investment proposals. A key aspect of this process is the financial evaluation of investment proposals, or what is frequently called capital budgeting. The achievement of an objective requires the outlay of money today in expectation of increased future ben­efits. It is necessary to decide, first, whether the anticipated future benefits are large enough, given the risks, to justify the current expenditure, and second, whether the proposed investment is the most cost- effective way to achieve the objective.

The discounted cash flow techniques considered here and in the following lectures are relevant whenever a company contemplates an action entailing costs or benefits that extend beyond the current period.

Indeed, it is not an exaggeration to say that discounted, cash flow analysis is the backbone of rnodern investment analysis and even modem business.