Corporate Finance For Dummies

Chapter 10

Bringing in the CAValry for Capital Asset Valuations

In This Chapter

Getting the gist of capital budgeting

Calculating rate of return and net present value

Figuring out how long it will take to recoup your investment

Making capital allocations work in your favor

Incorporating capital allocation into project management

When you think of investments, you probably think of things like stocks and bonds. These are types of investments, sure, but they’re only one class of investment, called financial investments. These investments are made in financial products and, for most businesses, they aren’t even the primary type of investment. That honor goes to a different type of investment, called a capital investment.

Considering how important capital investment is to every corporation, it comes as quite a relief that capital budgeting is an easy thing to perform. Throughout this chapter I show you how capital budgeting happens, including calculating the rates of returns on capital, ...