Question

List some of the kinds of information that is needed to evaluate a capital investment project.

Answer 1

To evaluate whether to Invest in a project or not is to be done by Calculating the NPV of the project. Now, to calculate the NPV of the project, we need to have the following: -

1. Cash flow for future

2. Period of the Project.

3. Initial Investment

4. Discounting Rate i.e. Cost of Capital

5. Salvage Value ( if any)

Now to evaluate, We find NPV which is given by

NPV = Present Value of all cash inflows - Present value of all cash outflows

if NPV comes out to be positive then the project should be accepted otherwise rejected.