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Appraisal of a capital expenditure project - Essay Example
Finance & Accounting
Pages 8 (2008 words)
BTA Machine & Tools Appraisal of a Capital Expenditure Project Introduction BTA Machine and Tools is a medium-scale private company located in Brisbane, specializing in machine and tool manufacturing and services. It was founded by husband and wife William and Teresita Anderson, also known as Bill and Terry Anderson (BTA)…
The three projects have different implications on the number of people needed to operate the machines, and vary in costs and capacity. Evaluating Capital Expenditures Choosing among capital expenditure projects should not rely solely on financial assessment. It is also important to undertake a subjective evaluation of each of the projects, in terms of its suitability for the macro-environment. An examination of the PEST (political, economic, social, and technological) conditions will determine which of the firms, if any, must be excluded by environmental conditions, or which would prove exceptionally suitable to these conditions. A risk assessment is another pre-requisite to determine which of the projects may pose extraordinary or undue risk for the company or the workers who shall be involved in the installation or operation of the new machinery. Incremental analysis shall be employed in this study, which requires discounting the existing financial data reflected by current operations, and instead rendering judgment based on the analysis of changes introduced by each project. ...
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