Home | ARTS | Financial Management | Need For Capital Investment - Capital Budgeting – A Conceptual Framework

Financial Management - Capital Budgeting – A Conceptual Framework

Need For Capital Investment - Capital Budgeting – A Conceptual Framework

   Posted On :  19.06.2018 10:53 pm

The factors that give rise to the need for capital investments are:

Need For Capital Investment
 
The factors that give rise to the need for capital investments are:

1. Expansion

2. Diversification

3. Obsolescence

4. Wear and tear of old equipment

5. Productivity improvement

6. Learning – curve effect

7. Product improvement

8. Replacement and modernization

The firm’s value will increase in investments that are profitable. They add to the shareholders’ wealth. The investment will add to the shareholders’ wealth if it yields benefits, in excess of the minimum benefits as per the opportunity cost of capital.

It is clear from the above discussion what capital investment proposals involve

a. Longer gestation period

b. Substantial capital outlay

c. Technological considerations

d. Irreversible decisions

e. Environmental issues 
Tags : Financial Management - Capital Budgeting – A Conceptual Framework
Last 30 days 113 views

OTHER SUGEST TOPIC