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en:what-is-an-investment-project [2018/09/10 15:09] federico [Classification of Investment Projects] |
en:what-is-an-investment-project [2018/09/10 15:10] federico [Evaluation of Investment Projects] |
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| An important part of any investment is the evaluation of its profitability. During the evaluation of the investment project, several measures for capital budget decisions will be made, including: | An important part of any investment is the evaluation of its profitability. During the evaluation of the investment project, several measures for capital budget decisions will be made, including: | ||
| - | * Internal Return Rate | + | * Internal Return Rate |
| - | * Net Present Value | + | * Net Present Value |
| - | * ROI | + | * ROI |
| Because this is done before the actual execution of the project, only the best performing projects (according to the estimates) will be carried on. The objective is to maximize profits (for private investments) or to maximize public well-being (for public investments). | Because this is done before the actual execution of the project, only the best performing projects (according to the estimates) will be carried on. The objective is to maximize profits (for private investments) or to maximize public well-being (for public investments). | ||
| The evaluation of investment projects requires to estimate future profits and expenditures. High risk investment projects are more difficult to evaluate, because there is a high volatility on variables that will define the expected return, like the price or the quantity of sales. | The evaluation of investment projects requires to estimate future profits and expenditures. High risk investment projects are more difficult to evaluate, because there is a high volatility on variables that will define the expected return, like the price or the quantity of sales. | ||