Page 56 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Neha Tikoo, Lovely Professional University Unit 4: Project Budgeting

Unit 4: Project Budgeting Notes

CONTENTS
Objectives
Introduction
4.1 Financial Projections

4.2 Means of Finance
4.3 Working Capital Requirement and its Financing
4.4 Time Value of Money
4.5 Cost of Capital
4.6 Cost of Equity
4.7 Weighted Marginal Cost of Capital

4.8 Appraisal Criteria
4.9 Risk Analysis in Capital Investment Decisions
4.10 Summary
4.11 Keywords
4.12 Review Questions

4.13 Further Readings
Objectives

After studying this unit, you will be able to:
Know about financial projections;
Understand Time value of money;

Know about cost of capital;
Understand about risk analysis in capital investment decisions.

Introduction

A budget is an important concept in microeconomics, which uses a budget line to illustrate the
trade-offs between two or more goods. In other terms, a budget is an organizational plan stated
in monetary terms.
In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures, that is, construct a model of how our
business might perform financially if certain strategies, events and plans are carried out.
2. Enable the actual financial operation of the business to be measured against the forecast.

3. Establish the cost constraint for a project, program, or operation.

LOVELY PROFESSIONAL UNIVERSITY 51