Improving the quality of investment decisions under consideration Improving the

Improving the quality of investment decisions under

This preview shows page 28 - 33 out of 33 pages.

Improving the quality of investment decisions under considerationImproving the quality of future investment decisionsAssist corrective action for current projects
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Additional factors impacting on investment criteria calculations are:the effect of inflation on the cost of capitalworking capital requirementslength of projecttaxationrisk and uncertaintyOther Factors Affecting Investment DecisionsOther Factors Affecting Investment Decisions
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There may be a number of risks associated with each ofthe variables included in a capital investment appraisal decision:estimates of initial costsuncertainty about the timing and values of future cash revenues and coststhe length of projectvariations in the discount rateRisk and Uncertainty and Decision-Making – Sensitivity Analysis (1)Risk and Uncertainty and Decision-Making – Sensitivity Analysis (1)
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sensitivity analysis may be used to assess the risk associated with a capital investment projectRisk and Uncertainty and Decision-Making – Sensitivity Analysis (2)Risk and Uncertainty and Decision-Making – Sensitivity Analysis (2)
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Project Appraisal Factors Used in Sensitivity AnalysisProject Appraisal Factors Used in Sensitivity Analysis
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To establish the appropriate levels of control, and toensure that projects run to plan the following areabsolute essentialsthe appointment of a good project manager with the appropriate level of responsibility and authorityregular project reviewsControl of Capital Investment ProjectsControl of Capital Investment Projects
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