How might the capital budgeting activities of a nonprofit organization be different from the capital spending...

How might the capital budgeting activities of a nonprofit organization be different from the capital spending decisions of a company?

Expert Solution

Capital budgeting refers to the technique of project evaluation comprising of five to six methods to determine the financial viability of the project. As per its one of the most used method, that is, NPV, in this case where the NPV is positive then the project shall be selected otherwise most of the times, it will be rejected.

For a company, capital budgeting decisions will be proceeded further if the project is yielding positive NPV otherwise the company will reject it. If the NPV will be zero then in such case, company will be reject will the same. Therefore, for a company for its spending decisions must carefully look for positive NPV projects.

Whereas in case of non-profit organizations, such entities are not solely focused on choosing the projects with positive NPV. Such entities focus on completion of project within given time and cost contraints. Even if the NPV of the project will be negative then it can continue the project as their motive of running the organization is solely not related to profit rather general public utility.

Hence as per above analysis, capital budgeting decisions of a company could be different from capital budgeting decisions of a non profit organization.

If you still have any doubt, then please ping me in the comment box, I would love to help you.

jeff jeffy answered 8 months ago

How does multinational capital budgeting differ from domestic only capital budgeting? How are they similar?

What capital budgeting techniques might a firm use apart from NPV and describe in words how...

What capital budgeting techniques might a firm use apart from NPV and describe in words how are they calculated? What are their drawbacks, and why are they still used?

How might the Capital Budgeting process change when the firm faces a dollar limit on capital...

How might the Capital Budgeting process change when the firm faces a dollar limit on capital investment projects? Provide an argument for why NPV is a superior capital budgeting technique over the IRR.

Could a company’s net capital spending be negative in a given year? Explain how this might...

Could a company’s net capital spending be negative in a given year? Explain how this might come about. 2. Could a company’s cash flow to stockholders be negative in a given year? Explain how this might come about. Could a company’s cash flow to creditors be negative in a given year? Explain how this might come about. Olive Corp. has current assets of $15,000, net fixed assets of $13,500, current liabilities of $5,000, and long-term debt of $20,300. a. What...

Application: How could capital budgeting be applied in your organization or to your personal finances? Not-for...

Application: How could capital budgeting be applied in your organization or to your personal finances? Not-for Profit Entities: Are the capital budgeting criteria discussed in the chapter applicable to not-for-profit corporations or the government? How so?

What is capital budgeting? What are some of the tools used in capital budgeting? How are...

What is capital budgeting? What are some of the tools used in capital budgeting? How are they used?

Briefly explain how capital budgeting relates to inflation and, in general terms, how does capital budgeting...

Briefly explain how capital budgeting relates to inflation and, in general terms, how does capital budgeting could cover companies against inflation?

What is capital budgeting? How do relevant costs impact the capital budgeting process. How should a...

What is capital budgeting? How do relevant costs impact the capital budgeting process. How should a company use equity or debt to purchase capitalized assets? Support your answer.

discuss how you think companies make capital budgeting decisions and how the process would be different...

discuss how you think companies make capital budgeting decisions and how the process would be different during special times, such as pandemic?

Provide an example of a capital budgeting project for an organization with which you are familiar....

Provide an example of a capital budgeting project for an organization with which you are familiar. Explain in detail how you would conduct a scenario analysis and a sensitivity analysis for this project. Explain what information each type of analysis provides that the other does not.

Question