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    Project Review and Administrative Aspects

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    amitsingla19
    This document discusses various administrative aspects of capital budgeting projects. It covers: 1) Capital budgeting does not occur in a vacuum and firms must deal with organizational complexities like siloed thinking, bureaucracy, and agency problems. 2) Firms develop procedures to manage in-progress projects, conduct post-completion audits, analyze abandonment decisions, and address agency issues. 3) Administrative facets include identifying opportunities, classifying investments, submitting proposals, making decisions, implementing budgets, and reviewing performance.

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    Project Review and Administrative Aspects

    Uploaded by

    amitsingla19
    606 views8 pages
    This document discusses various administrative aspects of capital budgeting projects. It covers: 1) Capital budgeting does not occur in a vacuum and firms must deal with organizational complexities like siloed thinking, bureaucracy, and agency problems. 2) Firms develop procedures to manage in-progress projects, conduct post-completion audits, analyze abandonment decisions, and address agency issues. 3) Administrative facets include identifying opportunities, classifying investments, submitting proposals, making decisions, implementing budgets, and reviewing performance.

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    project review

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    This document discusses various administrative aspects of capital budgeting projects. It covers: 1) Capital budgeting does not occur in a vacuum and firms must deal with organizational complexities like siloed thinking, bureaucracy, and agency problems. 2) Firms develop procedures to manage in-progress projects, conduct post-completion audits, analyze abandonment decisions, and address agency issues. 3) Administrative facets include identifying opportunities, classifying investments, submitting proposals, making decisions, implementing budgets, and reviewing performance.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    606 views8 pages

    Project Review and Administrative Aspects

    Uploaded by

    amitsingla19
    This document discusses various administrative aspects of capital budgeting projects. It covers: 1) Capital budgeting does not occur in a vacuum and firms must deal with organizational complexities like siloed thinking, bureaucracy, and agency problems. 2) Firms develop procedures to manage in-progress projects, conduct post-completion audits, analyze abandonment decisions, and address agency issues. 3) Administrative facets include identifying opportunities, classifying investments, submitting proposals, making decisions, implementing budgets, and reviewing performance.

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    Project Review and

    Administrative Aspects
    Amit Singla

    Capital Budgeting does not occur in vacuum.


    Rather it takes place in a real organization with
    its
    attendant
    complexities
    such
    as
    compartmentalized thinking, multi layered
    decision making, uneven knowledge of finance,
    bureaucratic red tape, and agency problem.
    To cope with these problems, firms develop
    suitable administrative procedures and try to
    mitigate agency problems through combination
    of monitoring and incentives.

    Various facets of project


    review

    Control of in-progress projects


    Post-completion audits
    Abandonment analysis
    Administrative aspects of capital
    budgeting
    Agency problem
    How sound is the capital budgeting
    system

    Control of in-progress projects


    Establishment of internal control
    procedures
    Use of regular progress reports

    Post-completion audits
    Performance evaluation may be done in
    terms of economic rate of return or book
    return on investment
    Regular post completion audits :
    Provide a documented log of experience for
    future decisions making
    Enable the firm in identifying individuals with
    superior abilities in planning and forecasting
    Serve as a useful ground for promising
    executives who need broader business
    experience and exposure

    Abandonment analysis
    Capital expenditure management is a dynamic process
    Capital investments must be reappraised periodically to
    determine whether they should be continued or
    terminated or divested
    Estimate the incremental cash flow on an existing project
    and establish an appropriate discount rate
    You can now decide whether the project should be
    continued, terminated, or divested.
    The following info is required for that:
    Present value of expected cash flows
    Salvage value
    Divestiture value

    Continuation versus abandonment decision


    Managing Divestments

    Administrative aspects of capital


    budgeting
    Identification of promising investment
    opportunities
    Classification of investments
    Replacement, modernization and rationalization,
    expansion, new product, research and development,
    obligatory and welfare investments

    Submission of proposals
    Decision making
    Preparation of capital budget and appropriation
    Implementation
    Performance review

    Agency problem

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