KRISHNA PALEPU HOME DEPOT PDF

How it impacts financial decisions regarding project management? Home Depot, Inc. The Home Depot, Inc. It also touches upon business topics such as - Value proposition, Financial management. Home Depot, founded in , pioneered the warehouse retailing concept in the home center industry. The company's niche strategy resulted in rapid growth in sales.

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How it impacts financial decisions regarding project management? Home Depot, Inc. The Home Depot, Inc. It also touches upon business topics such as - Value proposition, Financial management.

Home Depot, founded in , pioneered the warehouse retailing concept in the home center industry. The company's niche strategy resulted in rapid growth in sales. By , however, the company began experiencing deteriorating profitability. Students are asked to analyze the company's performance using ratio analysis and sustainable growth framework, and to recommend a plan of action.

In isolation the NPV number doesn't mean much but put in right context then it is one of the best method to evaluate project returns.

There are four types of capital budgeting techniques that are widely used in the corporate world — 1. Net Present Value 2. Payback Period 3. Internal Rate of Return 4. Profitability Index. Apart from the Payback period method which is an additive method, rest of the methods are based on Discounted Cash Flow technique. Even though cash flow can be calculated based on the nature of the project, for the simplicity of the article we are assuming that all the expected cash flows are realized at the end of the year.

Discounted Cash Flow approaches provide a more objective basis for evaluating and selecting investment projects. They take into consideration both — 1. Magnitude of both incoming and outgoing cash flows — Projects can be capital intensive, time intensive, or both. Depot Home shareholders have preference for diversified projects investment rather than prospective high income from a single capital intensive project. Timing of the expected cash flows — stockholders of Depot Home have higher preference for cash returns over years rather than years given the nature of the volatility in the industry.

Net Cash In Flow — What the firm will get each year. Net Cash Out Flow — What the firm needs to invest initially in the project. Step 1 — Understand the nature of the project and calculate cash flow for each year. Step 2 — Discount those cash flow based on the discount rate. Step 3 — Add all the discounted cash flow. Step 4 — Selection of the project. In our daily workplace we often come across people and colleagues who are just focused on their core competency and targets they have to deliver.

For example marketing managers at Depot Home often design programs whose objective is to drive brand awareness and customer reach. To overcome such scenarios managers at Depot Home needs to not only know the financial aspect of project management but also needs to have tools to integrate them into part of the project development and monitoring plan. This means that project will deliver higher returns over the period of time than any alternate investment strategy.

In theory if the required rate of return or discount rate is chosen correctly by finance managers at Depot Home, then the stock price of the Depot Home should change by same amount of the NPV. In real world we know that share price also reflects various other factors that can be related to both macro and micro environment.

In the same vein — accepting the project with zero NPV should result in stagnant share price. Finance managers use discount rates as a measure of risk components in the project execution process. Project selection is often a far more complex decision than just choosing it based on the NPV number. Finance managers at Depot Home should conduct a sensitivity analysis to better understand not only the inherent risk of the projects but also how those risks can be either factored in or mitigated during the project execution.

Sensitivity analysis helps in —. What are the key aspects of the projects that need to be monitored, refined, and retuned for continuous delivery of projected cash flows. Projects are assumed to be Mutually Exclusive — This is seldom the came in modern day giant organizations where projects are often inter-related and rejecting a project solely based on NPV can result in sunk cost from a related project.

Independent projects have independent cash flows — As explained in the marketing project — though the project may look independent but in reality it is not as the brand awareness project can be closely associated with the spending on sales promotions and product specific advertising.

Krishna G. Palepu , "Home Depot, Inc. Harvard Business Review Case Study. Published by HBR Publications. Case Study Home Depot, founded in , pioneered the warehouse retailing concept in the home center industry. Case Authors : Krishna G. Capital Budgeting Approaches Methods of Capital Budgeting There are four types of capital budgeting techniques that are widely used in the corporate world — 1.

Profitability Index Apart from the Payback period method which is an additive method, rest of the methods are based on Discounted Cash Flow technique. Sensitivity Analysis Project selection is often a far more complex decision than just choosing it based on the NPV number. Sensitivity analysis helps in — Understanding of risks involved in the project.

What will be a multi year spillover effect of various taxation regulations. What can impact the cash flow of the project. Some of the assumptions while using the Discounted Cash Flow Methods — Projects are assumed to be Mutually Exclusive — This is seldom the came in modern day giant organizations where projects are often inter-related and rejecting a project solely based on NPV can result in sunk cost from a related project. Explore More Feel free to connect with us if you need business research.

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Home Depot, Inc.

Home Depot, founded in , pioneered the warehouse retailing concept in the home center industry. The company's niche strategy resulted in rapid growth in sales. By , however, the company began experiencing deteriorating profitability. Students are asked to analyze the company's performance using ratio analysis and sustainable growth framework, and to recommend a plan of action. Palepu, Krishna G. Revised October

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Home Depot, Inc. Net Present Value (NPV) / MBA Resources

Home Depot, Inc. Home Depot, founded in , pioneered the warehouse retailing concept in the home center industry. The company's niche strategy resulted in rapid growth in sales. By , however, the company began experiencing deteriorating profitability.

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