Chapter 6

Is This the Right Idea?

Introduction

The chief determinant of what our organization will become in the future is the investment we make today. Our strategic objectives will not be achieved unless we outlay money today to receive benefits in the future. We need to regularly generate and evaluate creative investment proposals that will enhance our competitive position in the environment in which we choose to operate. A key step in this process is the financial evaluation of these proposals, which is frequently called capital budgeting. Here we decide, first, whether the anticipated future benefits are large enough, given the risks, to justify our investment and, second, whether the proposed investment is the most cost-effective way to ...

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