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SPMA 3P27 - Final Exam Questions And Answers $9.29   Add to cart

Exam (elaborations)

SPMA 3P27 - Final Exam Questions And Answers

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  • Course
  • SPMA 3P17
  • Institution
  • SPMA 3P17

Strategic Planning - ANS Process of defining an organization's strategy or direction & allocating resources to pursue this strategy. Hambrick & Fredrickson Strategy Diamond (ESAVD) - ANS - Economic Logic: how returns will be obtained - Staging: speed and sequence of moves - Ar...

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  • October 16, 2024
  • 6
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • SPMA 3P17
  • SPMA 3P17
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DocLaura
SPMA 3P27 - Final Exam


Strategic Planning - ANS Process of defining an organization's strategy or direction &
allocating resources to pursue this strategy.

Hambrick & Fredrickson Strategy Diamond (ESAVD) - ANS - Economic Logic: how returns
will be obtained
- Staging: speed and sequence of moves
- Arenas: where we will be active
- Vehicles: how we will get there
- Differentiators: how we will WIN

Capital Budgeting (EIR) (CIB) - ANS A budget for capital items:
- Equipment
- Infrastructure
- Renovation

All involved in the Capital Improvement Budget (CIB) which is distinct from the maintenance and
operating budget.

Benefits of Capital Budgeting (SAP) - ANS - Separates high-cost 'one-time' expenditures
from operating budget

- Allows planned growth and spending

- Provides focus

NFP vs. Corporations - ANS - No dividends in NFP. Goal is to provide best services to
stakeholder groups.

- Yes dividends in corporation. Goal is to maximize value for shareholders.

Capital Budget Process (simplified) (ILCIC) - ANS 1. Inventory/ audit capital assets
regularly
(What do we have?)

2. Link to strategic plan
(How does this mesh with strategy?)

3. Conduct a needs analysis

, (What do we need?)

4. Identify gaps... replace or repair
(What shape is it in?)

5. Conduct a cost analysis
(What are we looking at $?)

Capital Investments - Projects may be: (ID) - ANS Independent - acceptance of one is
unaffected by acceptance of another

Dependent - acceptance of one can be adversely impacted by the acceptance of another

Intro to decision-making: Choosing optimal capital budget
(finance-too many-internal) - ANS - Finance theory says: accept ALL projects with positive
NPV

- Too many projects could be challenging to manage

- If not enough internal cash to fund all projects: Capital rationing (increasing cost of capital).

Future Value vs. Present Value - ANS Future Value: the value of a present sum of money
at a future date.

Present Value: the value TODAY of a future amount.

CENTRAL to capital budgeting is finding NPV

Steps to assess ROI (DPE) - ANS 1. Determine initial cash outlay
2. Project future cash flows (be conservative)
3. Evaluate future cash flows (Payback, NPV)

Payback Method Considerations (TLT) - ANS - Main consideration is TIME it takes to pay
back investment.

- Doesn't specifically focus on LIFETIME utility of project.

- Doesn't consider time value of money.

Net Present Value (NPV) Method (TTH) - ANS - Takes into account time value of money.
- Provides an answer in today's $
- Finds the 'hurdle rate'

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