11

Capital
Budgeting
291

(Operating
Budgets)
(Operating Expendi
tures) (Sh
ort-Term Plan)
(Capital
Budgets)
(Capital Expenditures)
(Long-Ter
m plan)
Management Accounting
www.thailandaccount.com & www.ac13.tk 2
291

Management Accounting
www.thailandaccount.com & www.ac13.tk 3
292

(Estimated
Expenditures)

(Estimated
Receipt)


(Estimated Cost Saving)

Management Accounting
www.thailandaccount.com & www.ac13.tk 4
292

(Cost Reduction)
(Replacement)
(Expansion)

(Improvement of Existing Product
Line)
(New
Products)

(Health, Safety, and
Pollution
Management Accounting
control) & www.ac13.tk
www.thailandaccount.com 5
293

(Net Present

Value - NPV)
(Internal
Rate of Return - IRR)
(Payback Period)

NPV IRR
(Accounting Rate of Return - ARR)


(Discounted Cash Flow DCF)
Management Accounting
www.thailandaccount.com & www.ac13.tk 6
293


(Discounted
Cash Flow 2 DCF)

1.

2.




(
)

Management Accounting
www.thailandaccount.com & www.ac13.tk 7
294




1


(Future
1,000,000 10
Value)
(Present
-
Value) + + 120,000 +
1,000 120 120 ......................................................
120

10

Management Accounting
www.thailandaccount.com & www.ac13.tk 8
295


(Discounted
Cash

Flow DCF)

( Future
Value)


(Present Value; PV) =
1
(Discounted Factor;
D.F.)

Management Accounting
www.thailandaccount.com & www.ac13.tk 9
 Discounted Cash Flow

+ + +
......................................................
1,000 120 120 120

(PV)

1,000+
X1
+
X2 %

+ (Discounted)
X10
Management Accounting
www.thailandaccount.com & www.ac13.tk 10
325

2

326

Management Accounting
www.thailandaccount.com & www.ac13.tk 11
295
(Net
Present Value : NPV)

(Cash Inflow)


(Cash Outflow)

Management Accounting
www.thailandaccount.com & www.ac13.tk 12
296 1
500,000


153,000
5 (
PV (
326 ) =
153,000
) x 3.274 = 500,922

NPV ( ) = 500,922 500,000 =

16%
922

Management Accounting
www.thailandaccount.com & www.ac13.tk 13
297
Excel NPV

1. cell
Excel ()
500000 B1, 153000 B2, B3, B4,
B5, B6
2. NPV B7
=NPV(0.16,B2:B6)+B1
3. Enter B7 967

Management Accounting
www.thailandaccount.com & www.ac13.tk 14

297

(Internal Rate of Return :

IRR)



(Cash Inflow)

(Cash Outflow)

(Internal Rate of
Return)

Management www.thailandaccount.com
Accounting & 15 (Required
www.ac13.tk
297

Management Accounting
www.thailandaccount.com & www.ac13.tk 16
297

(Ordinary Annuity)
D.F. (Discounted Factor)




Discounted Factor:
Present Value of Ordinary Annuity
of 1 at Compound Interest
IRR
Management Accounting
www.thailandaccount.com & www.ac13.tk 17
297 2
1,100

315
D.F. = 51,100
/ 315 = 3.492
10% 12% 14% 16%

PV (5 3.79 3.60 3.43 3.35

) 1 5
D.F. 3 2
3.492
PV 0.172 (3.605 3.433) % 2%
PV 0.113 (3.605 3.492) % = 2
x (0.113 / 0.172) = 1.314 %
IRR = 12% +
Management Accounting
1.314% =
www.thailandaccount.com
13.314%
& www.ac13.tk 18
299

(Ordinary Annuity)
X
10,000
1, 2, 3
PV 6,000
4,000
=

16% (6,000
x 3,000

0.862) + (Trial
(4,000 and-+
x- 0.743)
?Error)
% (3,000 x 0.641) = 10,067 10,000
18%
= (6,000 D.F.x 0.847 ) +
(4,000 x 0.718) +
Table 1 :
Present Value of
x 0.609) = 9,781
(3,000
1
PV
Perio 2% 286 4% (10,067
6% 8%9,781). % 16% 18%

d 2% ( 16% 18%)
10,000
PV 1 0.9867 0.96 (10,067 0.94 0.92 . %0.86
10,000) 0.84

Management Accountingwww.thailandaccount.com & www.ac13.tk 19
0 = (2 2 286) 3 x 6 67 = 0.47 2 7
299

Excel IRR

1. cell
Excel (
) 10000
B1, 6000 B2, 4000 B3, 3000
B4
2. IRR B5
=IRR(B1:B4)
3. Enter B5 16.46%

Management Accounting
www.thailandaccount.com & www.ac13.tk 20
299 (Payback
Period)



(Time Value
of Money)

100,000


20,000 10

Management Accounting
www.thailandaccount.com & www.ac13.tk
21 5
299
:

+100

-100 +20+20+20+20+20+20+20+20
+20+20



10

Management Accounting
www.thailandaccount.com & www.ac13.tk 22
 (Payback
300 Period)

+190(2



)
250,000
1 , 2 , 3 4+80
-250 +50
100,000 90,000 80,000
+10 +90
50,000
0
+60 (?
= 2) + (60 / 80) =
2.75 (2 9 )

Management Accounting
www.thailandaccount.com & www.ac13.tk 23
300


(Accounting Rate of

Return : ARR)




(Time

=
Value of
Money)

Management Accounting
www.thailandaccount.com & www.ac13.tk 24
300

Management Accounting
www.thailandaccount.com & www.ac13.tk 25
301 (
)



. .

() 900,00 900,00
(
0 0

:)
=
() x (1 -


, (
)
600,00
600,00

) 0 0

=
(x (1 - )

) = 210,000 50,000 175,000 -

= 35,000 650,00 600,00
= 50,000 0 x (100%0

30%) = 35,000
Management Accounting
www.thailandaccount.com & 250,00
www.ac13.tk 26300,00
302

Management Accounting
www.thailandaccount.com & www.ac13.tk 27
302

(
1,100,0 .
1,100,0

)
( .
00 00

) (A 600,000
600,000
500,000
500,000
(2) )

200,000
300,000 500,000.
(B(30%)
(1) ) 90,000 150,000
(1)
= (A) +

210,000 350,000


=
150,000 410,000
(2)90,000
(B) 350,000
=
= 60,000
60,000 x

Management Accounting
= 200,000& x www.ac13.tk
www.thailandaccount.com
30% = 28
60,000
304

Management Accounting
www.thailandaccount.com & www.ac13.tk 29
309 ()

2
1
3
500,000 8
( 20,000 )
60,000
530,000
2
810,000
5 ( 10,000 )
160,000



Management Accounting
& 240,000
www.thailandaccount.com www.ac13.tk
30

200,000
309 ()


- 0-

290,000
750,000 750,000 100,000
(10,000
530,000 240,000 )

() 200,000
(810,00
60,000 160,000
0)
5
20,000 10,000

Management Accounting
120,000
www.thailandaccount.com & www.ac13.tk 31
 311

():
.

(
x1 (1 5) = 731,81
290,000

) x (1 0.3)
x
D.F.

x (
3.605
x = 5) = x
1 5
108,15
100,000
D.F.
(
x 0.3 x 3.605 =
)
( 5) = (10,000) x D.F.
0
x
0.567 = (5,670) 834,29
326
325
: 5

(
) (810,00
- 0)
200,00
= 0
120,000
x0.3 = 36,000
(574,00

0)
260,29
5
Management Accounting www.thailandaccount.com & www.ac13.tk 32
311



1.
2.
1

Management Accounting
www.thailandaccount.com & www.ac13.tk 33
311

1.

2.
Management Accounting
34
www.thailandaccount.com
& www.ac13.tk
312
(Profitability
Index : PI)

PV (1 X 23,000
63,000 Y


() (2
() ) (60,000) (20,000)
NPV () ) 3,000
PI = 3,000
1.05 1.15
(1) / (2)

Management Accounting
www.thailandaccount.com & www.ac13.tk 35
 End of Chapter 11

Management Accounting
www.thailandaccount.com & www.ac13.tk 36