RSM333H1 Chapter Notes - Chapter 13: Discounted Cash Flow, Capital Expenditure, Capital Budgeting
Document Summary
Capital expenditure a firm"s investments in long lived assets, which may be tangible or intangible. Determine the future direction as it involves large amounts of money. Most times impossible to get the investment back. The affect the risk of the firm. Capital budgeting the process through which a firm makes capital expenditure decisions. 3: monitor and evaluate the implemented decisions. If they don"t invest effectively it will affect its long term survival. In the short run the bad decision will make a firm less attractive than those that have better prepared themselves for the future. It will show up in the market price of the firm"s debt and equity securities which will decline and therefore increase its cost of capital. Successful strategies create competitive strategy, 5 critical factors that determines the attractiveness of an industry includes: entry barriers, the threat of substitutes, bargaining power of buyers, bargaining power of suppliers, rivalry among existing competitors.
