A1LAS ML1ALS CCMAN
CAI1AL 8UDGL1ING ICk 1999
Croup 9
Crkhan !avadov
?ilmaz ?ildiz
umuL 1urell
uygar ?uzsuren
9resenLaLlon CuLllne
1 lnLroducLlon
2 Avallable lnvesLmenL 9ro[ecLs
3 ALlas MeLal's CaplLal SLrucLure
4 lundlng for new lnvesLmenLs
3 CosL of CaplLal
6 9ro[ecL SelecLlon
7 Concluslon
ROI vs NPV approach
W ROI as a capital budgeting measure ?
W ROI is composed oI gain Irom
investments - cost oI investments /cost
oI investments
W JelghLed average cosLs of
caplLal(JACC) were noL menLloned ln
Lhe process
W Cnly Lhe efflclency of Lhe
lnvesLmenLs
W Laslly manlpulaLed for Lhe shorL
Lerm ob[ecLlves
W 1lme value of cash flows were noL
consldered ln Lhls meLhodology
n9I
W SomeLlmes we have poslLlve n9I s
and we have consLralnLs on our
caplLal budgeL
W Llnear programmlng ln order Lo
choose maxlmlzed n9I s
OPTIMAL BUDGETING
W CosL of caplLal of Lhe company does noL
always sLay consLanL
W So Lhe MCC schedule and lnvesLmenL
CpporLunlLy Schedule (lCS) are
esLabllshed
Avallable lnvesLmenL 9ro[ecLs
W Lxpanslon 9ro[ecLs
Los Angeles (Servlce polnL)
1exas (Servlce polnL)
llorlda (9lasLlc faclllLy)
W 1echnologlcal lmprovemenL
8apld 9roLoLyplng uevlce
W SysLem A
W SysLem 8
W 8ouLlne pro[ecLs
Plgh proflL
Medlum proflL
Low proflL
Avallable lnvesLmenL 9ro[ecLs
ro[ect Name 1ype 1ota| Cost (M||||on 5) Average Ikk ()
Los Ange|es Lxpanslon
32 133
1exas Lxpanslon
47 123
I|or|da Lxpanslon
63 137
System A * 1echnology
3 1831
System 8 * 1echnology
3 1764
Group 1 (n|gh prof|t) 8ouLlne
40 173
Group 2 (Med prof|t) 8ouLlne
30 140
Group 3 (Low prof|t) 8ouLlne
20 113
* 1hese pro[ects are mutua||y exc|us|ve pro[ects
ALlas MeLal's CaplLal SLrucLure
1ype of f|nanc|ng ercentage ()
Shortterm debt 730
Longterm debt 3032
referred stock 906
Common stock 3312
W Should comply Lo Lhese raLlos
W Cne Lype lncrease oLher
Lypes lncrease as well
lundlng for new lnvesLmenLs
W lnLernal lunds
Avallable
W $8249000
AddlLlons Lo 8eL Larn (1998)
W $34629000
W (L9S) x (# of Shares) x (70)
1oLal
W $42878000 lnLernal equlLy
W $80734000 LoLal
W LxLernal lunds (AddlLlonal)
new equlLy / new debL
CpLlmal caplLal sLrucLure!
lncreased cosL of caplLal!
CosL of CaplLal
Sources of I|nanc|ng 8efore 1ax Cost 1ax kate After 1ax Cost
ShorL 1erm uebL 7 40 42
Long 1erm uebL($41 mllllon) 93 40 37
Long 1erm uebL($41 mllllon) 118 40 708
9referred SLock 133 133
lnLernal LqulLy 1833 1833
LxLernal LqulLy 2023 2023