Chapter 12, Problem 12.4BYP

(a)

To determine

Capital budget evaluation process:

The capital budget evaluation process is the process by which management plans, evaluates, and controls investments in fixed assets.

In the capital budget evaluation process, some benefits are qualitative in nature, and it improves the qualitative considerations in the investment proposals.

(Answer based on 2013 Annual report of Company C Soups)

To discuss: The total amount of capital expenditures in the current year, and compare with the previous year.

(b)

To determine

To discuss: The interest rate of new borrowing debt in the current year.

(c)

To determine

The internal rate of return method:

The internal rate of return method is one of the capital investment methods which determine the rate of return wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method also called as the time-adjusted rate of return method, and it used to evaluate the different proposal’s expected rate of return.

To determine: The internal rate of return of current year capital expenditure.