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Factoring in capital budgeting decisions & assessing dividend policy

 

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  Question 1

Imagine you are a representative of management in Amazon and you must make a capital budgeting decision.  The decision is to implement a new computer network system to decrease the time between customer order and delivery. The cost will be 10% of last year’s profits. You are charged with describing the important considerations in the decision-making process to upper management.  In your response, be sure to include the following:

 

  • A description of the important factors, in addition to quantitative factors, that were considered when making this capital budgeting decision.
  • An explanation of how these factors are significant to the company.
  • A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
  • A calculation of the proposed return on investment based on criteria you select and justification for that ROI.

 

Develop a 200 – 250 word explanation supporting your recommendations.

 

Tip: For help with reading an annual report access this handy guide from Money Chimp(http://www.moneychimp.com/articles/financials/fundamentals.htm)

 

 

 

 Question 2

 

 Using the annual report of Amazon and other sources such as a 10k or 10q’s, discuss the dividend policy of your company. 

 

Annual report  http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsannual

 

Answer the following questions as part of your response:

 

  • How would you describe your chosen company’s dividend policy?
  • Why do you believe this company chose the dividend policy they have in place? 
  • Do you agree or disagree that they have selected the best dividend policy for the company?
  • How might this dividend policy function in both perfect and imperfect capital markets?
  • Calculate the dividend rate over the past 5 years.  Define why you believe that it has or has not changed over the last 5 years.

 

Support your position with evidence from the text or external sources.  
Your post should be 200-250 words in length.