This involves acquisition or building of asset which has or requires heavy financing. It is long term in nature and is made so as to improve, build or add value to a fixed asset. These ventures are known by their large cost and large scale in relation to other short term ventures. Project investment capital are finances a firm or organization puts in or invest to expand or achieve their long term goals.
There are several sources of funds available to a firm and they include banks, equity investors through issue of shares, financial institutions, angel investors, gentlemen in dark glasses, shy locks and venture capital. Capital investment is not only meant for resources or long term asset but they can also be used for purposes of working capital.
Decisions to be made here are known as capital investment. This decision aims at allocating the firms funds to most profitable investment. Evaluating a project and committing fund on it is considered to crucial in capital investment.
There are several investment projects that are resourceful in nature available to a firm, and choosing the venture that is most profitable or has a higher return on investment will have an impact on firms growth and life. It is the company responsibility to carry out research to improve already existing product, develop a brand new product or to come up with ways of to make its operation more economical and efficient failure the company economy will stagnate.
Shareholders will go for ventures that maximize their wealth. The shareholders will take up ventures which will result to growth of the company in the future. But the overall goal is to take up projects that will add value to the firm.
To evaluate a projects value there exist some methods that can be applied and they include interior rate of return, period of payback that is when the project will be able to return back the initial capital outlay. And lastly the present value, that is the future cash flow accruing to the new project. These cash flow are discounted back to present value and compared to the present value of the old asset.
A new market or new product can conceivably change business nature and scope, and so it is the top level management to evaluate and approve it. Another project that is capital in nature is expansion of already existing product and markets.
The expansion of market and existing product results to growth of the firm. This venture requires thorough financial analysis. Another capital venture is replacement project, this decision are usually common in manufacturing companies where they have to replace an old manufacturing plant.
Challenges faced when evaluating project viability is the use of forecast ed estimates which may not depict the true picture of cash inflow or outflow. Forecasting of sales revenue, costs and saving could be inaccurate. The commonly used methods of project evaluation include return on capital employed, payback period, net present value of investment and internal rate of return.
There are several sources of funds available to a firm and they include banks, equity investors through issue of shares, financial institutions, angel investors, gentlemen in dark glasses, shy locks and venture capital. Capital investment is not only meant for resources or long term asset but they can also be used for purposes of working capital.
Decisions to be made here are known as capital investment. This decision aims at allocating the firms funds to most profitable investment. Evaluating a project and committing fund on it is considered to crucial in capital investment.
There are several investment projects that are resourceful in nature available to a firm, and choosing the venture that is most profitable or has a higher return on investment will have an impact on firms growth and life. It is the company responsibility to carry out research to improve already existing product, develop a brand new product or to come up with ways of to make its operation more economical and efficient failure the company economy will stagnate.
Shareholders will go for ventures that maximize their wealth. The shareholders will take up ventures which will result to growth of the company in the future. But the overall goal is to take up projects that will add value to the firm.
To evaluate a projects value there exist some methods that can be applied and they include interior rate of return, period of payback that is when the project will be able to return back the initial capital outlay. And lastly the present value, that is the future cash flow accruing to the new project. These cash flow are discounted back to present value and compared to the present value of the old asset.
A new market or new product can conceivably change business nature and scope, and so it is the top level management to evaluate and approve it. Another project that is capital in nature is expansion of already existing product and markets.
The expansion of market and existing product results to growth of the firm. This venture requires thorough financial analysis. Another capital venture is replacement project, this decision are usually common in manufacturing companies where they have to replace an old manufacturing plant.
Challenges faced when evaluating project viability is the use of forecast ed estimates which may not depict the true picture of cash inflow or outflow. Forecasting of sales revenue, costs and saving could be inaccurate. The commonly used methods of project evaluation include return on capital employed, payback period, net present value of investment and internal rate of return.
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