Capital Budgeting Techniques in Kuwait

 

According to the literature review, discuss briefly what are the factors that affect the choice of capital budgeting techniques (explain with an example) One Mark Maxi. Words: 50 Words
 

 

 

 

 

 

 

 

   
Discuss how the use of project appraisal techniques differs according to the characteristics of a corporation? (explain with an example) One Mark Maxi. Words: 50 Words
 

 

 

 

 

 

 

 

   
Based on the result of the study, explain briefly what is the major obstacle of adopting capital budgeting techniques and explain how this obstacle could be treated? One Mark Maxi. Words: 50 Words
 

 

 

 

 

 

 

   
If you got a similar chance to conduct a research on Capital Budgeting in Oman, what would be your research topic? [hint: which topic you will investigate and why]

 

One Mark Maxi. Words: 50 Words
 

 

 

 

 

 

   
Mwasalat Company wants to renovate one of its existing buses at cost of OMR 200,000 and the Company will incur a repair cost of OMR 20,000 at the end of 3rd year from now. If these costs are incurred, the bus will be useful for 6 years. After a 6-year period, it will be sold at a salvage value of OMR 30,000. The total annual revenues of the bus will be OMR 260,000 and the total cost to operate the bus will be OMR 170,000 per year.

 

Alternatively, Mwasalat Company can purchase a new bus for OMR 190,000. The new bus will require some repairs at the end of the 6-year period at a cost of OMR15,000. Its salvage value will be OMR 40,000 after its useful life of 6 years. The total annual revenues of the new bus will be OMR 220,000 and its operating cost will be OMR 130,000 per year.

 

The company’s required rate of return is 15% before taxes.

 

Required:

A.    Should Mwasalat Company renovate the old bus or purchase a new bus? Justify your answer.

B.     Would the above decision of Mwasalat Company will change if an specific inflation is the expected for annual operating cost of new buses only at rate 3% every year? Justify your answer.

C.    Based on the above article, what are limitation of adopting NPV as capital budgeting techniques?

(Hint: present your argument with justification and supported with numerical evidence)

Three Marks Maxi. Words: 40 Words
 

 

 

 

 

 

   

 

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