1. Capital Budgeting University of the Witwatersrand Theory of Corporate Finance May 2011 Amy Bellinger (314193) Natasha Glassford (0711574H) Terri Haarburger (0703464H) Thato Mesheza (0614661G) Stacey Proudfoot (317053)

2. Presentation Outline 1. Introduction 2. Identification Process 3. Development Process 4. Capital Budgeting Methods 5. Selection Process 1) Capital Rationing 2) Risk Assessment 3) Cost of Capital 6. Control Process 7. Conclusion

3. What is Capital Budgeting?

4. Identification Process

5. Development Process Development Process - Screening Process

6. Development Process Development Process - Budgeting for Capital Projects

7. Development Process Development Process - Cash Flow Estimation

8. Capital Budgeting Methods Capital Budgeting Methods - Accounting Rate of Return

9. Accounting Rate of Return Accounting Rate of Return - Empirical Evidence Internationally South Africa

10. Capital Budgeting Methods Capital Budgeting Methods - Profitability Index

11. Profitability Index Profitability Index - Empirical Evidence Internationally South Africa

12. Capital Budgeting Methods Capital Budgeting Methods - Payback Period

13. Payback Period Payback Period - Empirical Evidence Internationally South Africa

14. Capital Budgeting Methods Capital Budgeting Methods - Discounted Payback Period

15. Discounted Payback Period Discounted Payback Period - Empirical Evidence Internationally South Africa

16. Capital Budgeting Methods Capital Budgeting Methods - Equivalent Annuity

17. Capital Budgeting Methods Capital Budgeting Methods - Internal Rate of Return

18. Internal Rate of Return Internal Rate of Return - Empirical Evidence Internationally South Africa

19. Capital Budgeting Methods Capital Budgeting Methods - Modified Internal Rate of Return

20. Modified Internal Rate of Return Modified Internal Rate of Return - Empirical Evidence Internationally South Africa

21. Capital Budgeting Methods Capital Budgeting Methods - Net Present Value (NPV)

22. NPV NPV - Empirical Evidence Internationally South Africa

23. Selection Process Selection Process - Risk Analysis

24. Risk Analysis Risk Analysis - Empirical Evidence Internationally South Africa

25. Selection Process Selection Process - Capital Rationing

26. Capital Rationing Capital Rationing - Empirical Evidence Use headings from text??

27. Cost of Capital

28. Cost Of Capital Cost Of Capital - Empirical Evidence Internationally South Africa

29. Control Process Control Process - Post Audit

30. Control Process Control Process - Performance Measures

31. Control Process Control Process - Performance Incentives

32. Conclusion