Cost of Capital - Non Profit Organization

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1.Using the information found in the references provided; determine the effect on the operations of government agency from instituting a charge for the cost of capital. The cost of capital for governments has been described as "capital charges" or "net realizable value." The capital charge for both terms is related to the cost of capital for nonprofit organizations.

2.Determine how the cost of capital should be computed for a nonprofit organization.

3.Within your nonprofit organization, what effect would using a charge for capital have on capital budgeting decisions? Justify your decision by providing specific examples, events, or other data that support your financial analysis as it relates to your organization.

4.Provide your recommendations as to how the cost of capital might be accepted as a new charge for capital use in your organization. What manager incentives might be necessary to be incorporated with the cost of capital to get it accepted?

Outline

WEEK 9 NON‐PROFIT OUTLINE I. Cover Sheet II. Executive Summary III. Table of Contents IV. Introduction What is it I am looking to accomplish with this paper? This should be designed around the fact that any reader will easily understand the effects on the government operation from instituting a charge for the cost of the capital and contrasting it to when funds are used by a business. V. Analys i s • Determine how the cost of capital should be computed for your nonprofit organization. To the extent possible, calculate what the cost of capital is.

Within your non‐profit organization, what effect would using a charge for capital have on capital budgeting decisions? Justify your decision by providing specific examples, events, or other data that support your financial analysis as it relates to your organization. • Provide your recommendations as to how the cost of capital might be accepted as a new charge for capital use in your organization. What manager incentives might be incorporated with the cost of capital to get it accepted?

How this might impact other issues such as providing services to the public, etc. • Personalize your experiences – specifically, what do you think would happen in the budgeting processes and it’s affect on managers – would decisions have been the same? VI. Summary and Conclusion Summarize the advantages, disadvantages and effects of implementing a

capital charging program and what incentives may be necessary to implement capital charging VII. Appendices Include any and all supporting information, references and research that I consider relevant.