Capital Investment Appraisal

College
Essay
Miscellaneous
Pages 3 (753 words)
Download 0
This paper analyzes the role of real options in making strategic investment decisions. Effective capital budgeting is important to corporate survival. During the capital budgeting process, managers make decisions that commit the firm's resources, primarily capital and labour, across business lines and over time…

Introduction


In applied capital budgeting, however, the fundamental concept of managerial flexibility, or active project management, has been well accepted and long practiced. In the past, one way decision-makers have attempted to supplement a traditional analysis is with "what if" analyses, such as sensitivity analyses, scenario analyses, and simulation. However, richer and more efficient capital budgeting decision-making frameworks are needed; and they should directly translate into increased corporate effectiveness, profitability, and long-term survival in today's globally competitive marketplace. (Black 637-354)
The primary enhanced decision-making framework is a "real option" analysis. During the last fifteen years, increasing attention has been given to the "real option" approach to capital investment decision-making. "Real options ... allow managers to add value to their firm, by acting to amplify good fortune or to mitigate loss". ...
Download paper
Not exactly what you need?

Related papers

Evaluation of Investment Appraisal Techniques
(Ross et al., 2002). The latter case is in a situation where only one project is being evaluated. In the event were the company is evaluating a number of projects, for which only one will be selected, the decision criteria is to first of all discard all projects with negative net present values and then select the project with the highest net present value among the positive NPV projects. (Ross et…
Investment Appraisal for Miggy and Brothers Co.
MBC is considering three alternatives as replacements: model A which will be sourced from the United States; Model B which is a British machine; and model C which will be imported from France. All of these machineries cost $100,000 and are seen to improve the production efficiency of the company and reduce the costs incurred in manufacture. As these are new machines, MBC will be hiring and…
Capital Investment Appraisal
In applied capital budgeting, however, the fundamental concept of managerial flexibility, or active project management, has been well accepted and long practiced. In the past, one way decision-makers have attempted to supplement a traditional analysis is with "what if" analyses, such as sensitivity analyses, scenario analyses, and simulation. However, richer and more efficient capital budgeting…
Capital Appraisal
1. Newton has three options with respect to the operation of the business. The first option is to manufacture market and sell the products itself; the second option is to outsource the entire manufacturing and marketing of the products to another company Faraday Electricals Ltd and receive royalty payments and the third option is to sell the patent rights to Faraday Electricals Ltd and receive the…
Investment appraisal report for introduction of christmas star in the product range of m/s noel plc.
Its product range of seabed survey components are marketed to a wide spectrum of national and multi-national oil service companies based in the UK and the North Sea periphery states.…
INVESTMENT APPRAISAL ASSIGNMENT
Project appraisal techniques and methods vary in their importance and significance therefore their use is also dependent upon what are the intended objectives of the finance managers while assessing and evaluating projects. It is also important to note that the basic method which is now being widely accepted as more credible mean of project appraisals is based on the time value of money concepts.…
Investment Appraisal
The capital budgeting decisions are pertaining to investment decisions which will create assets which will in turn create products/ services which create the profits. Generally, current assets are not earning assets but they act as a buffer for the smooth operations of the business. But the long-term investment decisions includes the mission and visions of the company and hence is of strategic…