COMM 308 Chapter Notes - Chapter 13: Investment, Opportunity Cost, Discounted Cash Flow

• School: Concordia University
• Department: Commerce
• Course: COMM 308
• Professor: Raad Jassim

Document Summary

13) capital budgeting, risk considerations, and other special issues. Capital expenditure - firm"s investments in long-lived assets, which may be tangible or intangible. Determine a company"s future direction and could be viewed as most important decisions a firm can make, since capex usually involve large amounts of money, and decision are usually irrevocable. Importance lies in ability to affect risk of firm. Capital budgeting - process by which firm makes capital expenditure decisions by identifying investment alternatives. 3: monitoring and evaluating implemented decisions implementing chosen investment decisions. Increased investment in machinery and equipment is one of the factors contributing to improved productivity. Porter"s five factors determining industry attractiveness: entry barriers, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, rivalry among existing competitors. Argues that after inception, firms have little immediate control over attractiveness of industry they"re in. Implies that industry structure will have significant input into every firm"s investment decisions.