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Jan 2012

How to evaluate capital expenditures and other long-term investments

Evaluating capital expenditures and long-term investments is a critical process for businesses. Better-managed organisations view all long-term programmes (capital and non-capital) in a disciplined environment.

This resource will explore some of the unique issues concerning budgeting and evaluating, financing, and managing a variety of activities.

In addition to typical capital projects, expenditures such as R&D, IT, advertising, training, and even planned builds in working capital can be viewed as long-term programmes. These all consume cash in anticipation of future pay out. 

 CGMA professionals can use this tool to help:

  • Compare evaluating long-term projects with an acquisition.
  • Discuss the role of budgeting.
  • Examine the impact of capital projects on cost structure.
  • Explore IRR as an evaluation tool and compare it to the present value approach.
  • Understand the basic concepts of financing and hedging. 

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CGMA Resources

Browse the full range of Thought Leadership resources here.
 

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The Kelly Criterion is a risk management strategy which has been used to allocate investment funds. This approach has gained some recognition as part of a process for reviewing or selecting capital projects.