The three most important considerations in capital budgeting for long-term, high-expense projects are planning, evaluation of alternatives, and financing. These considerations should be a visible part of any strategic investment plan. Planning includes carefully considering the potential pay-offs and risks of a project. The evaluation of alternative projects or programs comes about through applying appropriate decision-making techniques. Because of the long-term life and high expense of capital projects, proper financing usually necessitates effective debt management. In this Discussion, you ascertain how capital investment decisions are made in a specific organization. Then, you recommend a major capital investment for this organization and analyze the potential pay-offs and risks associated with it.
Write a brief description of a major capital investment, e.g., property, buildings, building additions, equipment, software, or technology that will last more than a year, that you might recommend for the organization. Then, analyze its potential pay-offs and risks, and explain how the organization might mitigate those risks.
Be sure to support your posting and responses with specific references to the Learning Resources.
- Mikesell, J. L. (2014).Fiscal administration: Analysis and applications for the public sector(9th ed.). Boston, MA: Wadsworth.
- Chapter 7, “Capital Budgeting, Time Value of Money, and Cost-Benefit Analysis: Process, Structure, and Basic Tools” (pp. 299–337)
- Chapter 15, “Debt Administration” (pp. 634–675)