Introduction to Finance

identifi cation stage 
fi nds potential 
capital investment opportunities 
and identifying if a project involves 
a replacement decision and/or 
revenue expansion
development stage 
requires 
estimating relevant cash infl ows 
and outfl ows
selection stage 
applying appropriate 
capital budgeting techniques to make 
a fi nal accept or reject decision
implementation stage 
accepted 
projects are executed in a timely 
fashion; cash outfl ows occur as the 
fi rm invests in the capital budgeting 
project
follow-up stage 
determining 
through analysis if a project is 
meeting expectations

---

17.2 Capital Budgeting Process
525
Wells Fargo:
This fi nancial institution is implementing a number of strategies to cross-
sell products, with a special emphasis on home equity loans. It has acquired a number of 
fi nancial institutions, including Wachovia and banks located in various states. Technology 
investments have improved its online fi nancial services capabilities and improve customer 
service. Wells Fargo’s strategy is to increase customer loyalty and to increase customer satis-
faction with bank visits.
Merck:
As a pharmaceutical company, its future relies on investing in research and devel-
oping a portfolio of products to meet the health needs of consumers. It initiates, curtails, 
expands, and shepherds a variety of formulations through the FDA drug approval process to 
maintain and grow its future cash fl ows. In late 2009, it completed its acquisition of Schering-
Plough.
Google:
now a division of Alphabet Inc., Google continues to refi ne its search capabil-
ities and, via the parent fi rm, play a part in email (Gmail), video (YouTube), driverless cars, 
and other cutting edge technologies.