Capital Investment Decision Making - Essay Example

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This paper, Capital Investment Decision Making, outlines that the assessment of the capital investment decision along with the allotment of the appropriate capital funds to the project mainly depends upon the requirement of the project and its related aspects…
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Capital Investment Decision Making
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Download file to see previous pages There is no specific criterion for the selection of the most adequate and perfect capital investment decision as it is highly dependent upon the strategic objectives of the firm. The prime objective of any capital investment decision is the increase and maximization in the value of shareholders’ funds. This prime objective is preceded by many other objectives which vary firm to firm. Some firms believe in the accumulation of the quick returns from the investment projects so they are more interested towards picking up those projects which ensure brisk cash inflows. On the contrary, some firms believe in the long-term growth of the firm and they are less bothered in the event of obtaining small returns or negative returns in the initial period of the project as the project will likely to generate solid returns after some time.
The ability of the financial manager or the owner of the business to undertake an in-depth study as well as taking the capital investment decision allow him/her to allocate the scarce resources of the business specifically in those investment opportunities which can best earn him/her the yield so that those returns can match the strategic objectives of the business in an adequate manner. As a result of this, at times the capital investment decisions are also referred as strategic capital investment decisions. Some examples of capital investment decisions include construction of a new factory site, launching a new marketing and advertising campaign, development of a new product, opening up a new branch for the business, an introduction of new technology for the business processes etc. ...Download file to see next pagesRead More
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