Week 2 Discussion
Good discussion on the different analysis types. Companies may use a variety of analysis tools and financial information to make critical operating and investment decisions. One of those tools, as you discussed, is internal rate of return. The IRR measures how well a project, capital expenditure or investment performs over time and helps companies compare one investment to another or determine if a project is viable. When considering a viable project, what is the relationship between the desired rate of return and the internal rate of return? Provide examples!
2. What is Capital Analysis of Investment?
Analysis of capital investment is a budgeting process used by corporations and government agencies to analyze long-term investment’s prospective profitability. Analysis of capital investment evaluates long-term investments that may include fixed assets such as equipment, equipment or real estate. The aim of this procedure is to discover the alternative to generate the greatest return on capital invested. Companies may use different methodologies to carry out an analysis of capital investment involving the calculation of the projected value of future project cash flows, the funding costs and the project risk-return.
