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Executive summary Keymer Double Glazing was established in 1990 Keymer Double Glazing, the premier, established installer

of windows, doors and conservatories. The firm is planning to buy a new machinery which had a capital cost of 4million pounds. The expected life of the new machine is 5 years and at the end it could be sold for 500,000 pounds. The company already has a existing machine which could be sold of 250,000 pounds or could be hired out to another company for 100,000 pounds per year for the next 3 years. The machine wont be having any value at the end of three year period. The existing machine generates 8 million pounds per year Importance Capital expenditure decisions represent the most important decision taken by a company. Their importance from three inters related reasons. Effects in the long Run: the consequences of capital expenditure decisions extend into the feature. The scope of current manufacture activities of a company governed largely by capital expenditures in the past. Likewise, current capital expenditure decisions provide the frame work for future activities. Capital investment decisions have an enormous bearing on the basic character of a company. Irreversibility: The market for used capital equipment in general is ill-organized. Further, for some types of capital equipment, custom-made to meet specific requirement, the market virtually be non-existent. Once such equipment is acquired, reversal of decision may mean scrapping the capital equipment. Thus, a wrong capital investment decision cannot be reversed without incurring a substantial loss. Substantial outlays: Capital expenditures usually involve substantial outlays. An integrated steel plant, for example, involves an outlay of several thousand millions. Capital costs tend to increase with advanced technology.

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