M6D1: Making Capital Investment Decisions

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Participation in this discussion gives you the ability to use concepts and terminology learned in Chapter 9 & 10 while having interchanges of information with peers and your professor.

Upon Completion of the Discussion You Will be able to:

  • Explain the basic types of financial management decisions and the role of the financial manager in obtaining capital for investment in the company.
  • Relate the goals of financial management to capital project planning.
  • Enumerate the financial implications of the different tools employed in capital decisions.
  • Apply the different methods of capital budgeting rationalization to actual situations.

After reading the 9th chapter of the text and doing some research on the internet regarding how a company makes capital decisions, you should be able to relate the process of raising capital and financing a corporation to project evaluation and decisions. Every company always has more capital needs than they are able to finance so determining how and what tools can be employed to maximize the chances of efficiently spending your capital is critical to all organizations.


Let’s Discuss: The Making of Capital Investment Decisions

You should be able to explain and support your reactions to the following questions:

  • What is the difference between NPV,IRR, Payback analysis and how are these methods related?
  • What are examples of opportunity costs and incremental cash flows?
  • How does the cash flow of a project impact whether or not a company pursues a certain project?
  • Give an example of how you would employ the different capital budgeting techniques to a real life situation or a situation you can envision. How would you differentiate among three different projects if you could only pursue one of those projects?
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