Capital Investments : Importance and Difficulties

8/9/2019 Capital Investments : Importance and Difficulties

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CHAPTER 1

OVER VIEW


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Capital investments: Importance and difficulties

Types of capital investments

Phases of capital budgeting

Levels of decision making

Facets of project analysis

Feasibility study: A schematic diagram

ey issues in major investment decisions !bjectives of capital budgeting

Common "eaknesses in capital budgeting

OUTLINE


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Capital Investments : Importance and i!!ic"lties

Importance

Long # term effects

Irreversibility

$ubstantial outlays

i!!ic"lties

%easurement problems

&ncertainty

Temporal spread


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T#pes o! Investments

%andatory Investments

'eplacement investments

()pansion investments

*iversification investments

' + * investments

%iscellaneous investments


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Mahindra & Mahindra to Invest Rs. 4,000 Crore on ChakanPlant Expansion- 28th a!st 20"4

#ltra$e%h Ceent Capex o' Rs. (,000 Crore )or expansion

to*ards expansions, +ro*neld proe%ts and !rindin! nitsat varios plants, !oin! 'or*ard. - a!st 20"4

/itanali /es Plans to Raise Rs. "( Crore 'or Expansion o'diaond and e*eller1 +siness !lo+all1 -!st " ,20"4

3edanta Ma1 Invest Rs. "0,000 Crore on ani!arh Rener1

Expansion- a!st, 20"45esa 5terlite shares !ained over 2 per %ent to Rs. 268.7 on$hrsda1 as the %opan1 !ot nod 'ro the lo%al p+li% to expand%apa%it1 o' its ani!arh rener1 'ro one illion tonne perann tpa9 to six tpa.-:l1 20"4lsto $&; India toda1 said it has +a!!ed a Rs. 200 %rore

order 'ro Po*er /rid Corporation o' India td P/CI9 'orp!radin! !rid s+stations in eastern parts o' the %ontr1.


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Khaitan Electricals Limited, the leading fan manufacturer, is on adiversication spree - foraying into domestic appliances, lamps,switchgear, wire and cables and pumps, aiming at over 100 per cent

growth in the topline in 200-!"

#n $anuary %, 2012, ending months of speculation, one of &ndia's leadingprivate sector companies, (eliance &ndustries, announced a ma)or forayinto the media and entertainment sector" +he company, renamed (eliance

&nfotel, has licenses for all 22 telecom circles .contiguous regions/ inthe country and is epected to start rolling out its service by the end ofthis year"

&n ec, 200!, urat-based tetile rm upta ynthetics Ltd will invest (s22% crore in a diversication pro)ect at its ilvassa unit"

+he pro)ect will be for manufacture of nylon tyre cord fabric .3+45/ andnylon lament yarn .356/, which are 7ey inputs for the tyre, tetile andfurnishing industries"

ept, 201%, aluminum giant 38L4# to invest (s %%,000 crore fordiversication and epansion in a host of sectors including energy toboost its productivity and protability"

ept 201%, Kerala-based 9alabar roup, promoters of )ewelleryretailer 9alabar oldand iamonds, has planned to diversify intodevelopment of townships, commercial hubs, e-commerce and organicfarming among others"
http://economictimes.indiatimes.com/topic/Goldhttp://economictimes.indiatimes.com/topic/Gold


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Capital $"d%etin% Process

&inancin%

Implementation

'election

Anal#sis

Revie(

Plannin%


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)e# Iss"es in Pro*ect Anal#sis

%arket Analysis

Technical Analysis

Potential%arket

%arket$hare

Technical,iability

$ensible Choices

Financial Analysis'isk

'eturn

(conomic Analysis

-enefits and Costs in efficiency

Prices!ther Impacts

(cological Analysis(nvironmental *amage

'estoration %easures
http://www.ickmr.com/projectprofiles.aspxhttp://www.ickmr.com/projectprofiles.aspx


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Levels o! ecision +a,in%

OperatingOperatingdecisionsdecisions

AdministraAdministrativetive

decisionsdecisions

StrategicStrategicdecisionsdecisions

.here is the decision taken.here is the decision taken Lo"er levelLo"er level

managementmanagement%iddle level%iddle level

managementmanagementTop levelTop level

managementmanagement

/o" structured is the decision/o" structured is the decision 'outine'outine $emi0structured$emi0structured &nstructured&nstructured

.hat is the level of resource.hat is the level of resource

commitmentcommitment

%inor resource%inor resource

commitmentcommitment%oderate%oderate

resourceresource


%ajor%ajor

resourceresource


.hat is the time hori1on.hat is the time hori1on $hort0term$hort0term %edium0term%edium0term Long0termLong0term


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&easi-ilit# 't"d# : A 'c.ematic ia%ram

/enerationo!Ideas

Initial 'creenin%

Is t.e Idea Prima &acie Promisin%

Plan &easi-ilit# Anal#sis

Cond"ct +ar,et Anal#sis Cond"ct Tec.nical Anal#sis

Cond"ct &inancial Anal#sis

Cond"ct Economic and Ecolo%ical Anal#sis

Is t.e Pro*ect Wort.(.ile 0

Prepare &"ndin% Proposal Terminate

Terminate

es No

Noes

P

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,

A

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E

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a

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n


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$asic Considerations : Ris, and Ret"rn

Investmentdecisions

&inancin%

decisions

Ret"rn

Ris,

+ar,et val"e

o! t.e !irm


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Capital Investments : Importance and Difficulties

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