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Concise Industries Private Ltd.: Capital Budgeting in Uncertain Times
內容大綱
Concise Industries Private Limited (Concise Industries), a small enterprise operating in the material handling and control equipment sector, manufactured fixed cranes and undertook annual maintenance contracts for its clients scattered across India. In the face of the uncertainty posed by COVID-19, the owner was contemplating whether to stick with the company’s current strategy or to expand to take advantage of the benefits of growth in this industry. As the economy continued to improve, he believed that demand for these goods would rise. He was considering project expansion but was unsure whether this move would bring value to his company. Hence, he was investigating several project expansion proposals and associated expected cash flow projections to make an investment decision.
學習目標
This case is suitable for postgraduate-level or executive programs that focus on capital budgeting decisions in a business. It could be applied in courses on (strategic) financial management, corporate finance or advanced corporate finance, and entrepreneurial finance. This case talks about the growth story and way ahead for Concise Industries and aims to understand how to substantiate investment decisions, which demand colossal capital outlays and are irreversible, in an uncertain economic landscape. After working through the case and assignment questions, students will be able to do the following:<ul><li>Determine how to make capital budgeting or investment decisions in uncertain business situations, and choose one alternative over another.</li><li>Use cash flow analysis with a hurdle rate to project cash flow for expansion under certainty and uncertainty.</li><li>Calculate the net working capital requirement and the depreciation and salvage value treatment in cash flow projections.</li><li>Evaluate various project expansion proposals based on a basic understanding of capital budgeting tools and techniques such as payback period (PP), profitability index (PI), discounted payback period (DPP), net present value (NPV), and internal rate of return (IRR).</li></ul>