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Global Business Startegies

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Global Business Strategies Week 4 Discussion Questions

MGT/448
May 02, 2013

Global Business Strategies Week 4 Discussion Questions

What are the elements of capital budgeting? How do you determine these elements in the Global business arena? Provide examples of how you would use capital budgeting analysis to determine the desirability of global projects.
There are three different types of capital budgeting processes: centralized, decentralized and integrated. In centralized capital budgeting, top management make all important strategic capital budgeting decisions. Operating managers bid on implementing projects selected by top management. In decentralized capital budgeting operating managers identify and initiate projects that are approved by top management based upon projected financial performance. Integrated capital budgeting has elements of both decentralized and centralized capital budgeting. Capital budgeting process defines the set and size of a firm’s real assets, which in turn generate the cash flows that ultimately determine its profitability, value, and viability. In principle, a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. The two things to consider when you would use capital budgeting in global projects are the following;

What will the Project Cost?
This is the first and most basic question a company must answer before pursuing a project. Identifying the cost, which includes the actual purchase price of the assets along with any future investments costs, determines whether or not the business can afford to take on such a project.

How Long Will It Take to Re-coup the Investment?
Once the costs have been identified, management must determine the cash return on that investment. An affordable project that has little chance of recouping the initial...

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