This action might not be possible to undo. Are you sure you want to continue?
This book is now nearly three decades old. Its longevity may be attributed to the growing number of academics and practitioners who have found it useful, relevant, and readable. My effort has been to present the key principles and techniques for evaluating capital expenditure proposals that have been developed primarily by financial economists. The book explains the rationale behind these principles and suggests ways and means to improve project appraisal and capital budgeting in practice. The book spans the gamut of capital budgeting, defined in its broadest sense. eginning with project planning, it culminates in the review of projects undertaken. In this respect, it is wider in coverage than other books in the field. !umerous examples have been included to illustrate the principles and techniques. "here necessary, two or more examples in the ascending order of complexity have been included. #part from analytical methods, the book discusses strategic, qualitative, and organisational considerations which impinge on capital budgeting decisions. It also describes and evaluates business practices in various areas. The book is primarily designed for two categories of readers $ students and practitioners. %tudents of professional programmes &like M #, '(M, '(#, #'#, and #I'"#) and post graduate courses in 'ommerce, (inance, and *conomics will benefit from this book. The book will also prove a valuable reference to corporate policy makers who formulate and shape corporate investment strategies+ to consultants and others who prepare project feasibility studies+ to executives who have a say in the selection of projects and development of the firm,s capital budget+ to officials of banks and financial institutions who evaluate projects as lenders and investors+ and to managers who are concerned with implementing as well as reviewing projects. The key guidelines relevant to project planning, analysis, selection, financing, implementation, and review discussed in this book are• • • • • • • • • •
.evelop a strategy that leads to sustainable competitive advantage. %harpen the ability of the firm to identify promising investment opportunities. (ormulate the project, considering the interrelationships among various aspects. (orecast realistically the incremental cash flows attributable to the project. *stablish a hurdle rate that is consistent with the risk exposure of the project. 'alculate the net present value of the project and value the real options. lend judgment with analytical reasoning. 'hoose a financing structure that lowers the cost of capital, preserves financial flexibility, and mitigates agency costs. (ormulate the project adequately, assign specific responsibilities to project managers, and use network techniques for project planning and control. 'onduct post/audit and periodically review project performance.
ecisions+ 2. 'hapter 16 discusses how the project rate of return can be fine tuned. and considerations that are helpful in articulating the capital allocation strategy of a firm.Impact on *arnings+ 1A.isciplining the 'apital udgeting 7rocess for %mall Ticket Items..%trategy as a 7ortfolio of :eal <ptions+ 12.*ssence of 7roject Management+ and 68. 'hapter A covers extensively the various investment appraisal criteria.1.. # number of boxes containing valuable perspectives and practical insights.>. 'hapter ? dwells on the various facets of technical analysis.2. 7art 8 consists of 'hapters >D11..9urdle :ate and 'ost of 'apital+ 12. Part " Selection–II: 'oncerned with more advanced techniques of selection or broader methodologies of evaluation.. 'hapter 14 explains the concept and measurement of cost of capital. %electionDI &7art 8) and %electionDII &7art C). shows how project cash flows are defined. and B=enture 'apital and 7rivate *quity. 'hapter .Managing :isks in 7rivate Infrastructure 7rojects+ 1. 7art C consists of 'hapters 16D1>. this book is divided into seven partsPart 1 Planning: 7art 1 covers the planning phase of capital budgeting.3ey Issues in Major Investment ..7ublic 7rivate 7artnerships+ 1... B%pecial . I added the following material• (ifteen new sections.@roup 7rocess+ 1>. • • ORGANISATION OF THE BOOK <rganised in terms of the broad phases of capital budgeting.2 .. 'hapter 18 looks at . Part Analysis: 7art 6 focuses on gathering and analysing basic information about the project..:everse (inancial *ngineering+ 1>. (our new minicases on the following topics. I revised and updated most of the chapters and appendices.14(inancial Modeling 5sing %preadsheet+ 16.>.emand #nalysis.?. 'hapter > discusses the principles of compounding and discounting. models. (inally. Part ! Selection–I: The content on the selection phase is very extensive..:ecommendations of the 'ommittee on Infrastructure (inancing+ 61. 'hapter C discusses the key steps involved in market and demand analysis.ecision %ituations.A...CHANGES IN THE SEVENTH EDITION 0 *nthused by the overwhelming response to the previous edition.BMarket and .'redit :isk :ating+ 1. 'hapter 2 explains how financial estimates and projections relating to a project are developed.Mistakes Made in :eal <ption =aluation+ 1>. 'hapter 11 expounds the techniques for measuring and evaluating the stand/alone risk of a project. 'hapter 6 discusses the key concepts.2. It has thus been split into two parts.8.2. B%ocial 'ost enefit #nalysis.1. 'hapter 1 provides an overview of capital budgeting. 'hapter 8 looks at the ways and means of generating project ideas and screening them at a preliminary level.11. To strengthen the book further.>.7ros and 'ons of Multiple 'osts of 'apital+ 16.
strategic.tion* (an. They can be downloaded from the website of Tata Mc@raw/9ill &&http-EEhighered. It also covers the administrative aspects of capital budgeting.+e-* # number of solved problems have been prepared for various chapters of the book.+e-* and (inica*e* To enable students to practice more. focuses on financing of infrastructure projects. Part $ Implementation: 7art 2 includes two chapters which look at the implementation of the selected projects. 'hapter 61 discusses various aspects of project management. These spreadsheets may be downloaded from the website of Tata Mc@raw/9ill &http-EEhighered. 'hapter 64 explains the concept and practice of venture capital and private equity. . '7M. 'hapter 1? shows how the capital budget may be drawn up in face of constraints.comEsitesE44>44>>. 'hapter 1C presents the methodology of social cost benefit analysis. ANCI&&AR' (ATERIA& To enhance the utility of the book for students and instructors.86). 'hapter 1A discusses various sources of finance used for setting up a project.comEsitesE44>44>>. So+. a number of additional problems and minicases have been prepared. Additiona+ Pro.mcgraw/hill.mcgraw/ hill. =enugopal 5nni developed *xcel spreadsheets for all the major numerical exhibits in the book. the following ancillary materials are available.a+ and Po/er)oint Pre*entation* # solutions manual containing solutions to the end of the chapter problems and cases and powerpoint presentations of all chapters are hosted on the web site of Tata Mc@raw/9ill &&http-EEhighered. and !etwork 'ost %ystem) may be employed for project planning. 'hapter 1. Part # Financing: 'onsisting of 'hapters 1A/64. 'hapter 12 explains the key insights provided by the option pricing theory and how the same may be employed for valuing the options embedded in capital projects.comEsitesE44>44>>. This can be accessed by the instructors who adopt the book. scheduling. Part % Review: 7art > discusses various issues involved in project review &'hapter 68). They can be downloaded from the website of Tata Mc/@raw 9ill &&http-EEhighered. 7art ? discusses how projects may be financed.86).86).86) So+ved Pro.mcgraw/hill.mcgraw/hill. and control.comEsitesE44>44>>. 'hapter 1> explores the qualitative. They may contact Tata Mc@raw/9ill for assistance in accessing the solutions manual and powerpoint presentation. using the technique of mathematical programming. I look forward to receiving suggestions from the readers for further improving the content of this book. S)read*heet* Mr.how capital budgeting decisions may be made in certain special situations. and organisational issues relating to capital budgeting. 'hapter 66 explains how network techniques &7*:T.
PRASANNA CHANDRA email@example.com .
I owe a profound intellectual debt to numerous authors whose ideas and contributions have shaped my thinking on this subject. on managing capital expenditures. I am indebted to a number of practitioners who have generously shared their views with me and to 'handra %ekhar of Tata Mc@raw/9ill for his interest in this book. !aganna.G. %uman %aha. In writing this book I have drawn on materials from a variety of disciplines that have a bearing on different facets of project appraisal and capital budgeting. I am grateful to the editors of these journals. I am thankful to :enuka for her help in preparing the manuscript of this book. PRASANNA CHANDRA chandra@cfm-india. Murthy. 7rof. 7rof. 7rof. for her unstinted support. F. %abarinathan. and 7radeep Gath for their valuable contributions to this book. 7ratap %ubramanyam. 7admini %rinivasan.:. 7rof. I am extremely thankful to =enugopal 5nni for thoroughly combing the book and adding useful material.Ac0no/+ed1e-ent* I am indebted to my students and the participants of executive development programmes conducted by me for providing the stimulus for writing this book. @. akin to a manual. I am grateful to 7rof.com . #t places I have drawn on my articles published in Indian anagement! "hartered Acco#ntant! anagement Acco#ntant! $ecision! "hartered Financial Analyst! and %o& 'dyog. They pointed to me the need for a comprehensive book. 7adma. My deepest gratitude is to my wife.
7rasanna 'handra.est (eacher Award from the association of Indian Management %chools. Tata %teel. IIM & ).r 'handra has been a (ullbright %cholar and a 5!. #!I @rindlays. IT'. . . for two years.irector of 'entre for (inancial Management.erivatives. 9e has authored over >4 articles in professional journals and business periodicals. Motorala. !IIT. 9e has been a consultant to many organiHations. <!@'. Tata 7ower.r. 5%#. . 9is other books include Financial anagement: (heory and Practice! Investment Analysis and Portfolio anagement! anaging Investments! Finance Sense! F#ndamentals of Financial anagement! and )al#ation of *+#ity Shares. 9*G. Torrent 7harmaceuticals Gimited. &(inance). 9e was a =isiting 7rofessor of (inance at %outhern Illinois 5niversity. angalore %tock *xchange Gimited. 9e has been a member of several committees including the 'apital Issues #dvisory 'ommittee. 'anara ank.7 (ellow. Infosys.r 'handra has conducted executive seminars for a number of organiHations like I!. @#IG. Inter/'onnected %tock *xchange of India. %asken 'ommunications. angalore for nearly two decades. the 9igh 7owered 'ommittee on Insurance %ector :eforms.etergents Gimited. Tata Motors. 9MT. is an M #. T#T#/ I M. I('I. =ysya ank. "ipro. .thor2* Profi+e . and the %* I 'ommittee on . Templeton Mutual (und. harat %hell. 9e has about four decades of teaching experience in postgraduate and executive education programmes. 7h. 9e has served or is serving on the boards of a number of organiHations including 7ower (inance 'orporation. I'(#I. 9e has received several honours including the . and 9industan 5nilever. 9e was a 7rofessor of (inance at Indian Institute of Management.A.#G. and 3arnataka %oaps and . Microsoft. 5nit Trust of India Investment #dvisory %ervices Gimited.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.