Download - Pa Decisions
4
Making capital investmentdecisions
INTRODUCTION
In this chapter we shall look at how businesses can make decisions involvinginvestments in new plant, machinery, buildings and similar long-term assets. Inmaking these decisions, businesses should be trying to pursue their key financialobjective, which is to maximise the wealth of the owners (shareholders).
Investment appraisal is a very important area for businesses; expensive and far-reaching consequences can flow from bad investment decisions.
LEARNING OUTCOMES
When you have completed this chapter, you should be able to:
l Explain the nature and importance of investment decision making.
l Identify the four main investment appraisal methods found in practice.
l Use each method to reach a decision on a particular investment opportunity.
l Explain the methods used to monitor and control investment projects.
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