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What is investment
decision-making?
How a business decides whether a capital
investment project is worthwhile
How a business chooses between
different investment alternatives
Involves both quantitative techniques and
consideration of qualitative factors…read more

Slide 3

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Businesses take decisions
about investment in a
variety of circumstances:
When introducing new products
Expansion
Investing in new technology
Large promotional campaigns…read more

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Capital investments are:
Usually expensive
Often long term
Likely to be irreversible
It is therefore important to make the
right decision…read more

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Qualitative factors
affecting decisions
Objectives
Corporate image
Human relations
Risk…read more

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Quantitative techniques
Forecasting cash flows associated with
a project
Quantitative appraisal:
­ Payback
­ ARR (Average rate of return)
­ Discounted cash flow: NPV (Net present
value)…read more

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