The case covers capital budgeting practice in a real estate company in Vietnam.
The case is ideally suited for participants in MBA, Executive MBA, and Masters in Finance programmes. It can be taught near the end of a course on corporate finance/financial management. It can also be taught as an advanced topic in financial management courses.
A real estate company in Vietnam has prepared a capital budget for, what it claims is, a 600 billion VND project. The weighted average cost of capital used by the company is 10.64 percent. An analyst in a consulting company is asked to thoroughly review the capital budget of what appears to be a project that is too good to be true. Lending rates in Vietnam at this time were around 15 percent.
Expected learning outcomes
Participants will learn how to correctly apply the principles of computing: net after tax cash flows from a project; and weighted average cost of capital, particularly in the context of real estate companies.
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