Why Are Capital Investment Decisions So Important

Capital Investment Decisions cannot be underemphasized as they related to long term decisions. Examples of such decisions are:

• to introduce new products;
• drop existing products;
• purchase specialized machinery and
  
• invest in additional plant,machinery and factory

These decisions are very difficult ones as management need to look at a longer time horizon re: several years ahead and to forecast which might happen. Once decided, they are difficult to alter. Such capital investment decisions can increase or erode shareholder values in the long term.

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