Capital Land

Topics: Net present value, Cash flow, Internal rate of return Pages: 25 (6799 words) Published: December 25, 2012
Executive summary
In this report, we will discuss about the capital budgeting of CapitaLand, one of the largest real estate companies in Asia. Business activities and financial background of CapitaLand will be mentioned in this report, also with the evaluation of two potential mutually exclusive capital investments as well as the objective of these investments for this company. This report also contents the analysis of four main different capital budgeting techniques used in the investments for supporting decision making process. Definition, formula of each technique will be given along with the figure of the investments as well as its advantages and disadvantages. The numeric data (initial investment, cash flows…) used for the calculating process will be disguised by our group. Recommendations and Suggestions will be given based on the analytic figure before having the final decision of which project will be chosen.  

Capital Budgeting is the process of analyzing a company’s investible decisions in which the company determines if the projects are worth pursuing and will yield the most return over an applicable period of time. The investments can be purchasing new machinery, replacement machinery, new plants, new products, or research development projects. Select an effective and profitable investment is one of the most important of the financial management of an organization, moreover, having a suitable choice of investment helps the organization to stay competitive and take advantages over other competitors. Hence, capital budgeting is one of the most important step to evaluate the opportunity before making the final decision of which investment will be chosen. 1.1 CapitaLand Organization

1.1.1 Introduction
CapitaLand limited is one of the largest real estate companies of Asia. The main business activities of CapitaLand includes real estate, hospitality and real estate financial services which spans more than 110 cities and states in over 20 countries. Although the headquartered and listed in Singapore, these core businesses are mainly focused in growth cities in the areas of Asia Pacific, Europe and the Gulf Cooperation Council (GCC) countries. CapitaLand is the parent company of The Ascott Group Limited and it is also the merged company of the DBS Land and Pidemco Land. Their list of subsidiaries and associates include four real estate investment trust (REITs)-which are tax designations for a real estate corporate with the purpose of reducing or eliminating the corporate income taxes-these are CapitaMall Trust, CapitaCommercial Trust, Ascott Residence Trust and CapitaRetail China Trust, as well as Australian Property group Australand. About the real estate and hospitality portfolio of the company, it includes homes, offices shopping malls, services residences and mixed developments. 1.1.2 Group structure.

Real Estate
CapitaLand Residential Singapore
CapitaLand China
CapitaLand Commercial
CapitaLand Retail
CapitaLand Integrated Leisure, Entertainment & Conventions
Australand (listed, 59.3% ownership)
The Ascott Limited
Financial Services
CapitaLand Financial
CapitaMall Trust (listed, 29.7% ownership)
CapitaCommercial Trust (listed, 31.3% ownership)
Ascott Residence Trust (listed, 47.0% ownership)
CapitaRetail China Trust (listed, 26.6% ownership)
Quill Capita Trust (listed, 9.4% ownership)
1.1.3 Financial Background
31/ 12/201031/12/200931/12/200831/12/200731/12/2006
Total Revenue
Gross Profit
Total Operating Expense
Operating Income
Net Income Before Taxes
Net Income After Taxes
Net Income Before Extraordinary Items
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