Capital Investment Process Essay Example | Topics and Well Written Essays - 3250 words

Capital Investment Process - Essay Example Therefore, it was always implied that despite techniques used to make the future more clear, capital investment decision requires a manager to use intuition. This study of a Boston Mayflower - a residential social landlord with about 5,000 houses - indicates that more accent must be put on qualitative appraisal techniques. The essay begins with building a theoretical base to get the reader familiar with some basic concepts of capital investment appraisal theory. The second part of the essay is devoted to a step-by-step analysis of the investment project of Boston Mayflower. This part of the essay is devoted to the description of methods used in the analysis of capital investment. Developed theoretical frameworks include several different techniques of analysis varying mainly in measures of investments. In other words, it is clear that the ultimate goal of every investment is maximisation of owner's wealth; however specific characteristics of every project oblige management to choose carefully and with correspondence to the most vital needs of the business. The most typical example is the choice between long-term investment project with high return value and short-term project but with lesser return. Although the first development plan will lead to better profits in the end, sometimes a company chooses the second one. That means the time factor is more important for owners than greater profits in the illustrated case. Generally, capital investment decisions are always connected to the following list of specific features: a significant outlay of cash; long-term involvement with greater risks and uncertainty because forecasts of the future are less reliable; irreversibility of some projects due to their specialised nature, for example, plant which having been bought with a specific project in mind may have little or no scrap value; a significant time lag between commitment of resources and the receipt of benefits; management's ability is often stretched with some projects demanding an awareness of all relevant diverse factors; limited resources require priorities on capital expenditure; project completion time requires adequate continuous control information as costs can be exceeded by a significant amount. (McGrath, 1998) These characteristics make the managerial decision even more important, as it must be connected with the strategy of a company. Simply, a manager should choose not the most profit-making project, but the most suitable one for the business strategy of his/her company. This statement leads to a careful choice of the evaluation technique used to determine, which investment plan complements best the chosen strategy. There several factors, which should be taken into consideration during evaluation of investment opportunities: initial cost of the project; phasing of the expenditure; estimated life of the investment; amount and timing of the

EMAAR Essay Example | Topics and Well Written Essays - 1500 words

EMAAR - Essay Example EMAAR has its headquarters in Dubai (United Arabs Emirates). Despite the above growth, EMAAR has still been in the verge of discussing new prospects of growth which entails geographical expansion to new and virgin lands most so the far east and North Africa (Group, 2008). The other strategy is that of product segmentation. It deals in variety of products ranging from the housing industry, hospitality and tourism industry. The company has also invested much in the Education Sector and the Health sector where it has built schools and hospitals as well as investing in the best facilities for the buildings (Group, 2008). The company as well deals in the financial instruments in the financial markets of Dubai, where last year (2010/2011) alone it traded in a turnover of over 29 billion AED in stocks (Group, 2008). The company’s total sale of apartments in the year 2010/2011 has been estimated to be Dh 583; this has been stated as a decline of about 86% of the previous year’s sales (Group, 2008). This may be because of the economic hard time, which even caused a crush in the western economies. The revenue from such sales was estimated to be about $ 1.52 billion last year, which is still a drop of about 10%, the previous year’s revenues. The drop in revenue is attributed to and depicts a slash in prices due to stiff competition in the industry. Two major products that the company deals in are the apartments and the villas. The apartments are the largest income-generating unit with a revenue of Dh 183 in the last quarter of last year. Villas on the other hand made good sales, the sales was about Dh126.4, this was a drop though of some few percentages (Group, 2008). EMAAR does not operate as a monopoly in its business. Just as I have mention previously it operates in a highly competitive environment where there are several