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Consider where you currently work, where you have previously worked, or a well-known company where you...

Consider where you currently work, where you have previously worked, or a well-known company where you would like to work. How might this company make capital investment decisions? What capital investment decisions do you see evidence of at this company?Consider where you currently work, where you have previously worked, or a well-known company where you would like to work. How might this company make capital investment decisions? What capital investment decisions do you see evidence of at this company?

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Capital investment decisions are those decisions made by a management team regarding the utilization of fund spent to procure capital assets. Capital investment decisions can be also called as capital budgeting. It is an important Long term Financial decisions of every firm.

Capital investment decisions occur frequently.This decision is not as simple as it seem.In order to reduce the risk involved in capital investment the company has to identify best opportunities.It is a contribution of funds toward the acquisition of long term assets for the growth. Long-term assets include the purchase of new equipment, the replacement of old machinery etc. The company must first determine its capital needs which require immediate attention. Sometimes company may have enough resource for the capital investments of many projects and sometimes they have only enough resources to invest in a limited number of opportunities.

In this case, the company has to evaluate both the time and money needed to acquire asset. Next is to find alternatives for investment. As there are so many alternative available, a company will need to establish baseline criteria.This step will help in differentiating alternatives.Then evaluate alternatives using screening and preference decisions.If more alternatives exceeds the minimum expectations, a preference decision is considered. A preference decision compares the potential projects that meet screening decision criteria.Then it will rank the alternatives in order of importance, feasibility, etc. While making the final decision, all financial and non-financial factors are considered.

Capital Investment Decision includes two important decisions. Financial decision and Investment decision. By taking a project, the business has agreed to make a financial commitment and that involves own set of risk. Project delay, cost overruns etc can delay & increase the cost of the project.

In addition to a financial decision, a company is also making an investment in its future. So the capital investment decision must consider financial & investment.

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