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idenyify and explain the keys stages in the capital investment decision-making process, and the role of investment appraisal in
Finance & Accounting
Pages 5 (1255 words)
Name: Tutor: Course: Date: University: The keys stages in the capital investment decision-making process, and the role of investment appraisal in this process Introduction The lifecycle of an investment can be considered as comprising of certain phases. The key stages involved in the capital investment decision-making entail identifying investment opportunities, screening investment proposals, analysis and evaluating investment proposals, approving investment proposals, and implementing monitoring and reviewing investments (Gotze, Northcott, and Schuster 2008, p.6).
Initial investigation of the proposal pursues highlighting the projects’ feasibility (both technically and commercially). The origination of the proposal can come either from laid mechanisms that the entity has established to scan the environment for investment opportunities; technological developments/changes; or from those working in technical positions (Rohrich 2007, p.3). Investment opportunities or proposals could emanate from analysis of strategic choices, an investigation of the present business environment, research and development, or legal requirements. A two-stage decision approach can be an effective way of encouraging investment ideas whereby, first, organizational personnel are encouraged to advance any preliminary undeveloped ideas that they have. The advanced ideas are then reviewed in the first stage and those that fail feasibility test screened out using decision criteria (Baker and Powell 2005, p.191). The most promising ideas continue to the next stage whereby thorough financial and strategic appraisals are undertaken. ...
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