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CAPITAL INVESTMENT APPRAISAL

Introduction

• An appropriate capital investment decision can only be made after

considering several quantitative and qualitative factors.

• Quantitative appraisal of a proposed capital investment usually requires

forecasting of investment-related and associated cash flows, which is
then discounted at an appropriate risk adjusted discount rate based on

WACC.

• This process is complicated further when involving a foreign investment

as we then have to consider additional factors, such as country risk and
different currency units.

• This learning unit is based on the following chapters in your prescribed

textbook:

• Managerial Finance – 8th edition

• Chapter 6: The investment decision, part 6.9

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