Now that you understand the process of capital budgeting, pick an industry that you currently work in, are passionate about/interested in working in. Conversely, you can pick a current business news that involves a capital budgeting decision (anytime a company is looking to make a long term change/expansion/contraction, 9 out of 10 times it involves a capital budgeting decision.
After you’ve picked an industry and or company, share what is going to make a particular project successful from a capital budgeting standpoint.
Here is a brief example:
Industry: Transportation – Airline
Project: Overseas expansion using Airbus A321 NEO aircraft.
JetBlue is considering expanding to flying to Europe. What will make it a successful capital budgeting decision/investment? The company will need to pick profitable routes where aircraft utilization would be high with potential for high revenue/seat/mile. JetBlue currently is a premium discount carrier with a tremendous business class product (Mint Class). There is increasing competition from budget carriers such as WOW Airlines and Norwegian. Given JetBlue’s success with their business class product, it would be best to not directly compete with low cost carriers and frugal companies. Instead, they should target legacy international carriers such as British Airways, Air France/KLM, etc. They also need to keep costs low, so a single-aisle fuel ultra efficient aircraft would be smart decision to keep operating costs under control.