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Capital budgeting and project analysis · CFA Level I · Courselo

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CFA Level I
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Corporate issuers / corporate finance

Capital budgeting and project analysis

Corporate issuers / corporate finance · Lesson 2 of 4

Lesson 2 of 4

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Unit 5

Corporate issuers / corporate finance

4 lessons · 6 h 30 min of study

Corporate issuer forms, governance, and stakeholder considerations1 h 15 min of study
Capital budgeting and project analysisReading · 0%
Cost of capital and capital structure1 h 45 min of study
Operating leverage, financial leverage, and working capital management1 h 30 min of study

This unit is ≈7% of the CFA Level I, across 4 lessons. Full syllabus

Lesson 2 of 4 · Corporate issuers / corporate finance

Capital budgeting and project analysis

3 quick checks≈2% of the testStretch: Stretch: harder material that separates the top grades

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By the end you’ll be able to

Describe the capital budgeting process, including project generation, analysis, selection, implementation, and post-audit.
Calculate and interpret incremental after-tax cash flows for capital projects, including initial outlay, operating cash flows, terminal value, opportunity costs, externalities, sunk costs, and changes in net working capital.

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Adaptive questions on capital budgeting and project analysis.

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Calculate and interpret net present value, internal rate of return, profitability index, payback period, and discounted payback period.

Apply capital budgeting decision rules to independent and mutually exclusive projects, including the ranking conflicts that can arise between NPV and IRR.

Explain the effects of project interactions, capital rationing, project sequencing, and unequal lives on capital budgeting decisions.

Evaluate the impact of inflation, taxation, and project risk on project analysis, and explain the use of scenario analysis, sensitivity analysis, and break-even analysis in assessing project risk.

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