Description
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Capital Budgeting
From a financial manager's perspective, discuss the capital-budgeting process used to identify projects that add to the firm's value. How do capital-budgeting decisions help to define a firm's strategic direction?
2
The Asset Pricing Model
Research and define Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT). How are they the same and how are they different?
Explanation & Answer
Attached.
OUTLINE
1. INTRODUCTION
2. BODY
3. CONCLUSION
4. REFERENCE
BUSINESS AND FINANCE
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Business and Finance
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Instructor
Institutional Affiliation
Date
BUSINESS AND FINANCE
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Capital budgeting process
Capital budgeting is the process of which financial managers determine how a project is
worthwhile or investment. A corporation uses the capital budgeting to find out if they can expand
its fixed assets or spend money on employee training (Abor, 2017). The following steps can help
a financial manager identify projects that add value to the company.
The process starts by looking for any available opportunities. For any given initiative, the
company will have some options to consider, and take the most valuable option presented. For
instance, if a corporation needs to expand its warehouse facilities, the managers will have two
options to evaluate (Abor, 2017). The manager will either consider buying a new larger space at a
different location or expand the current building. The evaluation of the two options is essential for
the company financial and logical sense.
The second ...
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