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Welcome to Unit 6Capital Budgeting Techniques
In this unit, we see examples of how financial managers use financial tools to make capital investment decisions. We explore the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method. In particular, this unit will teach you how to determine which cash flows are relevant (should be considered) when making an investment decision. For example, suppose you are asked to recommend buying or not buying a new building. As the financial manager, it is your task to identify cash flows that, in some way or another, affect the value of the investment (in this case, the building) and calculate whether the money spent on the project upfront is more or less than the value received. In this unit, we also learn how to calculate "incremental" cash flows when evaluating a new project, which can also be considered as the difference in future cash flows under two scenarios when a new investment project is being considered. You can start by reviewing the unit learning outcomes and then reviewing the unit resources.
To access the AI Summary of this page or to download the PDF transcript for the video, please click on the icons above.
AI Summary
Video Transcript
Source and License: This work is licensed by Saylor Academy under a Creative Commons Attribution-NonCommercial-Sharealike 4.0 International License (CC BY-NC-SA 4.0). This content was created using Genially and Synthesia. AI-generated avatars and voices in this video were created using Synthesia and remain subject to Synthesia’s Terms of Service; these elements are not covered by the Creative Commons license. Synthesia trademarks and services remain the property of Synthesia. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially’s Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
Source and License: This work is licensed by Saylor Academy under a Creative Commons Attribution-NonCommercial-Sharealike 4.0 International License (CC BY-NC-SA 4.0). This content was created using Genially and Synthesia. AI-generated avatars and voices in this video were created using Synthesia and remain subject to Synthesia’s Terms of Service; these elements are not covered by the Creative Commons license. Synthesia trademarks and services remain the property of Synthesia. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially’s Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
AI Summary
This unit focuses on how financial managers evaluate long-term investment projects. You will learn how organizations determine whether a potential project will add value to the company. Here are some key takeaways:
- Understand the concept of capital budgeting and its importance in financial decision-making.
- Examine evaluation techniques such as net present value, internal rate of return, profitability index, and payback period.
- Explore how to identify relevant and incremental cash flows when analyzing investment projects.
- Recognize how financial tools help determine whether an investment will increase company value.
You can start by reviewing the unit learning outcomes and the unit resources.
Unit 6 Introduction Video
Saylor Academy
Created on March 11, 2026
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Transcript
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Experiencing playback issues or need translation options?
Welcome to Unit 6Capital Budgeting Techniques
In this unit, we see examples of how financial managers use financial tools to make capital investment decisions. We explore the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method. In particular, this unit will teach you how to determine which cash flows are relevant (should be considered) when making an investment decision. For example, suppose you are asked to recommend buying or not buying a new building. As the financial manager, it is your task to identify cash flows that, in some way or another, affect the value of the investment (in this case, the building) and calculate whether the money spent on the project upfront is more or less than the value received. In this unit, we also learn how to calculate "incremental" cash flows when evaluating a new project, which can also be considered as the difference in future cash flows under two scenarios when a new investment project is being considered. You can start by reviewing the unit learning outcomes and then reviewing the unit resources.
To access the AI Summary of this page or to download the PDF transcript for the video, please click on the icons above.
AI Summary
Video Transcript
Source and License: This work is licensed by Saylor Academy under a Creative Commons Attribution-NonCommercial-Sharealike 4.0 International License (CC BY-NC-SA 4.0). This content was created using Genially and Synthesia. AI-generated avatars and voices in this video were created using Synthesia and remain subject to Synthesia’s Terms of Service; these elements are not covered by the Creative Commons license. Synthesia trademarks and services remain the property of Synthesia. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially’s Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
Source and License: This work is licensed by Saylor Academy under a Creative Commons Attribution-NonCommercial-Sharealike 4.0 International License (CC BY-NC-SA 4.0). This content was created using Genially and Synthesia. AI-generated avatars and voices in this video were created using Synthesia and remain subject to Synthesia’s Terms of Service; these elements are not covered by the Creative Commons license. Synthesia trademarks and services remain the property of Synthesia. All Genially proprietary elements such as templates, themes, built-in assets, stock media, and other “Genially Content” remain subject to Genially’s Terms of Service and are not covered by this Creative Commons license. These elements must remain embedded in the course and cannot be reused or redistributed independently.
AI Summary
This unit focuses on how financial managers evaluate long-term investment projects. You will learn how organizations determine whether a potential project will add value to the company. Here are some key takeaways:
- Understand the concept of capital budgeting and its importance in financial decision-making.
- Examine evaluation techniques such as net present value, internal rate of return, profitability index, and payback period.
- Explore how to identify relevant and incremental cash flows when analyzing investment projects.
- Recognize how financial tools help determine whether an investment will increase company value.
You can start by reviewing the unit learning outcomes and the unit resources.