20CAPITAL INVESTMENT DECISIONSIntroduction and Key Concepts
CHAPTER INTRODUCTION
Capital investment decisions (CIDs) are some of the most important business decisions that managers make. Capital decisions are generally defined as relatively large investments that will have an economic life of several years. We will define capital investments broadly, including purchases of equipment, new product development projects, acquiring a product line or a company, and many others. The capital investment decision is a determination of whether the project is likely to create value for shareholders. In this chapter, we will introduce capital investments, evaluation, and key decision criteria, and outline the steps required to evaluate CIDs. In Chapter 21, we will cover advanced topics of CIDs, including dealing with risk and uncertainty, monitoring projects, and presenting capital investment decisions.
THE CAPITAL INVESTMENT PROCESS
A strong capital investment process is critical to ensure a thorough evaluation and decision. Figure 20.1 outlines key steps in an effective capital investment process.
Companies should identify potential capital projects as part of their strategic and annual operating planning activities. The capital budget should be an important element of each plan. For strategic plans, the managers should look out ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month, and much more.
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.
Julian F.
Head of Cybersecurity
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.
Addison B.
Field Engineer
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.
Amir M.
Data Platform Tech Lead
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.
