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48776941-Capital-Expenditure.ppt

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Capital Expenditure A capital expenditure may b defined as an expenditure the benefits of which are expected to be received over period of time exceeding one year. Feature of investment decision ã Its exchange of current funds for benefits to be achieved in future. ã Future benefits are expected to be realized over a series of years. ã They are generally for long-term and has significant effect on profitability of the firm. Importance of investment decision ã ã ã ã They influence the firm’
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  Capital Expenditure A capital expenditure may b defined as an expenditure the benefits of which are expected to be received over period of time exceeding one year.  Feature of investment decision ã Its exchange of current funds for benefits to be achieved in future. ã Future benefits are expected to be realized over a series of years. ã They are generally for long-term and has significant effect on  profitability of the firm .  Importance of investment decision ã They influence the firm’s growth in the long run   ã They affect the risk of the firm ã They involve commitment of large amount of funds ã They are irreversible, or reversible at substantial loss.  Types of investment decision ã Expansion of existing business ã Expansion of new business ã Replacement and modernization
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