Discussion: Pay-Offs and Risks of Capital Investments


Question Description

The three most important considerations in capital budgeting for long-term, high-expense projects are planning, evaluation of alternatives, and financing. These considerations should be a visible part of any strategic investment plan. Planning includes carefully considering the potential pay-offs and risks of a project. The evaluation of alternative projects or programs comes about through applying appropriate decision-making techniques. Because of the long-term life and high expense of capital projects, proper financing usually necessitates effective debt management. In this Discussion, you ascertain how capital investment decisions are made in a specific public organization. Then, you recommend a major capital investment for this organization and analyze the potential pay-offs and risks associated with it.

Post a description of a major capital investment, e.g., property, buildings, building additions, equipment, software, or technology that will last more than a year, that you might recommend for the public organization. Discuss how the use of cost benefit analysis could be use to determine if this investement is a financially sound one for the organization. Then, analyze its potential pay-offs and risks, and explain how the organization might mitigate those risks.

Be sure to support your posting and responses with specific references to the Learning Resources.

Required Readings

Mikesell, J. L. (2018). Fiscal administration: Analysis and applications for the public sector (10th ed.). Boston, MA: Wadsworth.
  • Chapter 7, "Capital Budgeting, Time Value of Money, and Cost-Benefit Analysis: Process, Structure, and Basic Tools" (pp. 311-349)
  • Chapter 15, "Debt Administration" (pp. 673-716)

Tutor Answer

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Pay Offs and Risks of Capital Investments




Pay Offs and Risks of Capital Investments
Capital investments decisions aim at allocating funds for capital investment in an
effective manner to realize the best possible returns. Some of the essential capital investment
decisions include the assessment of projects and capital allocation. Organizations have different
criteria for selecting appropriate investment decisions such as asserting on projects that ensure
prompt returns or long-term growth. These decisions enable managers to allocate the limited
resources appropriately.
The U.S Center for Disease Control and Prevention (CDC) is a public organization whose
objective is to protect public health and safety. Just like a corporate company, the organization
management face capital investment dec...

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