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FIN 201 · Unit 4 of 6

Capital Budgeting

Corporate Finance

Start unit · 5 lessons →

Learning objectives

After completing this unit, you will be able to:

  • to business decisions
  • Apply the frameworks in "Capital Budgeting" to a real management decision
  • Make progress on your Corporate Finance executive memo applied project

Why this matters

Capital Budgeting is essential to Corporate Finance. Lessons build fluency with anchor-company examples, worked problems, and assessments on the unit page.

Lesson

Unit overview

Complete all 5 lessons in order. Each lesson follows the program authoring standard: conceptual prose, worked examples, practice problems, and managerial judgment prompts. Finish unit exercises and the knowledge check before marking the unit complete.

Connection to applied work

This unit feeds directly into Corporate Finance executive memo. As you read, capture notes, examples, and data you can reuse in that deliverable. Strong students finish each unit with a draft section of their project, not just highlights.

Practice

  1. Write a one-page summary of this unit in your own words without looking at the lesson.
  2. Find a real company example (public filing, news article, or personal experience) that illustrates the main concept.
  3. Draft one paragraph recommending an action a manager should take based on this unit.
  4. Add at least three terms from this unit to your course glossary.

Knowledge check

Answer these without notes before marking the unit complete:

  1. What is the central idea of "Capital Budgeting"?
  2. What mistake do beginners most often make when applying this material?
  3. How does this unit help you complete Corporate Finance executive memo?
  4. What is one decision you face this month where this unit applies?

Key takeaways

  • to business decisions
  • Business concepts only matter when they change a decision.
  • Your FIN 201 assessment (Time value of money, risk and return, capital budgeting, and corporate valuation.) rewards applied understanding, not memorization.

Unit assessment

Complete each section below. Score 80%+ on the quiz to finish this unit's assessment.

40% applied project35% knowledge checks25% reflections

Exercises

Apply what you learned in this unit with structured practice.

ExerciseApplied practice: Capital Budgeting45 min
Complete a focused practice exercise on **Capital Budgeting**. 1. Choose a real company, product, or situation you know. 2. Apply one core framework from this unit to analyze it. 3. Write your analysis in 300–500 words with a clear recommendation. 4. Cite at least one credible source.

Deliverable

300–500 word analysis document saved to your portfolio under FIN 201.

Rubric

  • • Framework applied correctly (not just named)
  • • Specific evidence from a real example
  • • Clear recommendation with tradeoffs acknowledged
  • • Professional writing with source citation
ExerciseDrill: Capital Budgeting30 min
Work through the practice problems in the unit lesson without looking at notes. Then check your work against the lesson and write a short reflection: - What you got right - One mistake you caught - One concept to review before the next unit

Deliverable

Problem solutions + 150-word reflection in your FIN 201 workbook.

Rubric

  • • Attempted all practice items before checking answers
  • • Honest reflection on errors
  • • Identifies a specific review action

Model / spreadsheet

Build or extend a spreadsheet model tied to this unit.

ModelSpreadsheet model: Capital Budgeting60 min
Build a spreadsheet model demonstrating **Capital Budgeting**. **Requirements:** - Separate Input, Calculation, and Output sections - Label all units ($, %, units) - Include at least one sensitivity or scenario comparison - Add a balance check or reasonableness test Use Google Sheets or Excel. Link the model to your Corporate Finance executive memo project where applicable.

Deliverable

Spreadsheet file with Inputs / Model / Outputs tabs · One-paragraph summary of key insight from the model · Screenshot or export saved to portfolio

Rubric

  • • Assumptions stated explicitly
  • • Logic is auditable (formulas or steps visible)
  • • Output answers a specific business question
  • • Sensitivity or scenario considered

Knowledge quiz

Check your understanding before marking the unit complete.

1. Summit urgent-care NPV $4.18M at 8.29% WACC. Decision rule:

2. Urgent-care IRR 14.2% vs WACC 8.29%. For a conventional independent project:

3. Site A IRR 16% NPV $2M; Site B IRR 18% NPV $1M mutually exclusive. Choose:

4. Imaging capEx $4.2M saves $1.5M/year undiscounted. Payback approx:

5. Building unlevered project NPV at WACC, you should:

6. New Summit site may cannibalize nearby visits 12%. In NPV model you should:

7. Break-even visits/day ≈ 92 vs base 110. If actual month-9 average is 94, best action per kill criteria example:

8. −$10M investment, +$4M/year years 1-3, r=9%. NPV sign:

Next unit: Financing the Firm →