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This case series considers the capital-investment decisions to be made by executives of a large chemicals firm in January 2008. The A case (UVA-F-1543) presents a go/no-go project evaluation regarding improvements to a polypropylene production plant. The B case reviews the same project but from one level higher, where the executives face an either/or investment decision between two mutually exclusive projects.
Expose student to a wide range of capital-budgeting issues, including (1) the identificiation of relevant cash flows, (2) the critical assessment of a capital-investment evaluation system, (3) the classic "crossover" problem, in which project rankings disagree on the basis of net present value (NPV) and internal rate of return (IRR), and (4) the assessment of real option value latent in capital-investment opportunities such as the option to postpone the investment.