Capital Investment Decisions
Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria. (1) Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk. (2) These projects must also be financed appropriately. (3) If no such opportunities exist, maximizing shareholder value dictates that management must return excess cash to shareholders (i.e., distribution via dividends). Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.
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Famous quotes containing the words capital, investment and/or decisions:
“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
—Abraham Lincoln (1809–1865)
“The only thing that was dispensed free to the old New Bedford whalemen was a Bible. A well-known owner of one of that city’s whaling fleets once described the Bible as the best cheap investment a shipowner could make.”
—For the State of Massachusetts, U.S. public relief program (1935-1943)
“No one ever promised me it would be easy and it’s not. But I also get many rewards from seeing my children grow, make strong decisions for themselves, and set out on their own as independent, strong, likeable human beings. And I like who I am becoming, too. Having teenagers has made me more human, more flexible, more humble, more questioning—and, finally it’s given me a better sense of humor!”
—Anonymous Father. Ourselves and Our Children, by Boston Women’s Health Book Collective, ch. 4 (1978)