The main aim of shareholder holders when making or deciding on capital investment is wealth maximization by purchasing non current asset which can yield profits. The managers of organization are supposed to be in a position to evaluate a project before committing their funds in it to know which venture would result to a positive cash flow when there are constraints in resources. So project investment capital is a sensitive issue as it determines the firm viability.
A business should be able to know and identify the sources of funds available to them. These sources can angel investors, loan from friends and families, loans from bank, financial institutions, money from venture capitalist and equity investors.
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 exist many methods which facilitate choosing of right and appropriate investment or project to invest in. Many companies will stress for projects with prompt returns, this is actually the kind of projects the managers will go for, but this does not mean it is the shareholders goal.
Making strategic venture decision consistent with the organization goal is an issue as some shareholders prefer using appraisal techniques which raises the opportunity for their projects to be selected. Another challenge in investment projects is ill structuring which will result to use of approaches that have never been used before thus resulting to complexity, irreversibility, novelty and ambiguity.
There are many asset investment projects and include investment in new markets or products. New asset venture is necessary for the expansion and growth of the company. A company growth is also very important to the economy as it results to more jobs being created and also more revenue to the government.
Capital decisions involve a process so that one can use to reach to an accurate conclusion, the process start with project identification, then defining project, screen, implementation, monitoring and carrying out post audit.
The cost benefit analysis is very vital for a project it requires long term estimation of cost and benefit. Taking an example of a typical capital venture which involves acquisition of a fixed asset, the asset has it estimate useful life during which it will be used to maximize on sales revenues while reducing cost of operation. After the asset useful life has elapsed, the asset can either have a residue or disposal value and it can be sold to fetch some funds.
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.
A business should be able to know and identify the sources of funds available to them. These sources can angel investors, loan from friends and families, loans from bank, financial institutions, money from venture capitalist and equity investors.
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 exist many methods which facilitate choosing of right and appropriate investment or project to invest in. Many companies will stress for projects with prompt returns, this is actually the kind of projects the managers will go for, but this does not mean it is the shareholders goal.
Making strategic venture decision consistent with the organization goal is an issue as some shareholders prefer using appraisal techniques which raises the opportunity for their projects to be selected. Another challenge in investment projects is ill structuring which will result to use of approaches that have never been used before thus resulting to complexity, irreversibility, novelty and ambiguity.
There are many asset investment projects and include investment in new markets or products. New asset venture is necessary for the expansion and growth of the company. A company growth is also very important to the economy as it results to more jobs being created and also more revenue to the government.
Capital decisions involve a process so that one can use to reach to an accurate conclusion, the process start with project identification, then defining project, screen, implementation, monitoring and carrying out post audit.
The cost benefit analysis is very vital for a project it requires long term estimation of cost and benefit. Taking an example of a typical capital venture which involves acquisition of a fixed asset, the asset has it estimate useful life during which it will be used to maximize on sales revenues while reducing cost of operation. After the asset useful life has elapsed, the asset can either have a residue or disposal value and it can be sold to fetch some funds.
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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