Category: Capital investments

Relevant Cash Flows

Investment decisions, like all other decisions, should be analysed in terms of the cash flows that can be directly attributable to them. These cash flows should include the incremental cash flows that will occur in the future following acceptance of the investment. The cash flows will include cash inflows and outflows, or the inflows may be represented by savings […]

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Internal Rate of Return
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Internal Rate of Return

The internal rate of return (lRR) is an alternative technique for use in making capital investment decisions that also takes into account the time value of money, The internal rate of return represents the true interest rate earned on an investment over the course of its economic life This measure is sometimes referred to as the discounted […]

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Capital Investment Decisions
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Capital Investment Decisions

Capital investment decisions are those decisions that involve current outlays in return for a stream of benefits in future years. it is true to say that all of a firm’s expenditures are made in expectation of realizing future benefits. The distinguishing feature between short-term decisions and capital investment (long-term) decisions is time. Generally, we can classify short-term decisions as […]

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