Capital Budgeting Analysis Assignment

2466 Words 10 Pages
1. This memo is intended to convey the process in which the United States Air Force receives and distributes money each fiscal year. This assignment is submitted as an alternate proposal to the Cost of Capital Budgeting Analysis assignment, as the US Department of Defense does not use capital budgeting processes or the weighted average cost of capital numeric to qualify how to spend and invest their money, nor does it calculate official ROIs. In this paper, I will discuss the chronological process by which the Department of Defense and the U.S. Government create and implement the yearly budget, which is over $400 billion, specifically as it applies to the U.S. Air Force.

2. In order to accomplish this task, one must first understand the background, nomenclature and terms used to describe the Air Force, the Department of Defense (DoD) and the Planning, Programming, Budgeting and Execution (PPBE) process that is used to request, allocate and expend money.

a. In 1962, former Secretary of Defense Robert McNamara created the DoD Planning, Programming and Budgeting System in order to
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The Programming stages deals with the different “colors of money” that are: Military Personnel, Operations and Maintenance, Procurement, Research, Development, Test & Evaluation, Military Construction and “Other” (which includes the health program, explosives, chemical agent protection and others). It also endeavors to translate the goals and objectives of the requirements into finite actions with resources applied in order to successfully plan for future financial needs. This takes into account the alternatives and tradeoffs while also integrating all requirements into a balanced program. In the acquisition environment of the Air Force, countless pieces of equipment, airframes and their support are acquired and sustained. Generally, we deal with the Research, Development, Test & Evaluation and the Operations and Maintenance “colors” of money to create and sustain those

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