An Assessment of Capital Investment Decision in Business Entity (A Case Study of Global Soap and Detergent Industry Limited Ilorin Kwara State Nigeria)

TABLE OF CONTENTS

TITLE PAGE                                                              PAGE

CERTIFICATION                                                              I

DEDICATION                                                                   II

ACKNOWLEDGEMENT                                                   III

TABLE OF CONTENTS                                                    V

CHAPTER ONE

1.0        INTRODUCTION                                                       1

1.1        STATEMENT OF THE PROBLEM                              2

1.2        OBJECTIVE OF THE STUDY                                     3

1.3        SIGNIFICANT OF THE STUDY                                  4

1.4        SCOPE OF THE STUDY                                            4

1.5        PLAN OF THE STUDY                                               5

1.6        RESEARCH METHODOLOGY                                   5

1.7        DEFINITION OF THE TERMINOLOGY                       6

CHAPTER TWO

2.0        LITERATURE REVIEW                                            16

2.1        INTRODUCTION                                                     16

2.2        CONTROLLING DECISION                                      20

2.2.1        ORGANIZATION DECISION                             20

2.2.2        STAFF DECISION                                            21

2.2.3        MOTIVATION DECISION                                 22

2.2.4        THE EVALUATION DECISION                         22

2.3                       CAPITAL EXPENDITURE DECISION                  23

2.3.1                SELECTION OF RELEVANT DATA FOR              DECISION MAKING                                           24

2.3.2                USING COSTING DECISION MAKING               25

2.3.3                COMPREHENSIVE INCOME APPROACH          25

2.3.4                DIFFERENTIAL ANALYSIS APPROACH             25

2.3.5                FINANCIAL ACCOUNTING                                 26

2.4                IDENTIFY RELEVANT DATA FOR SPECIAL                        DECISION                                                        26

2.4.1        PURCHASING A NEW EQUIPMENT                27

        REFERENCES                                                        37

CHAPTER THREE

RESEARCH METHODOLOGY                                       38

3.0        INTRODUCTION                                                     38

3.1        SAMPLE SIZE                                                         39

3.2        SAMPLE TYPE                                                        39

3.3        HISTORICAL BACKGROUND OF THE STUDY         40

3.4        METHOD OF GETTING DATA (PRIMARY AND         SECONDARY)                                                         42

CHAPTER FOUR

        DATA PRESENTATION ANALYSIS AND         INTERPRETATION                                                 45

4.1   INTRODUCTION                                                     45

4.2   CAPITAL BUDGETING DECISION                           46

4.3   SCREENING TESTS                                                48

4.4   THE NET PRESENT VALUE METHOD                    48

4.5   CALCULATION OF IRR BY LINEAR         NTERPRETATION                                                   54

CHAPTER FIVE

SUMMARY CONCLUSION AND RECOMMENDATION

5.0        SUMMARY OF FINDING                                          56

5.1        CONCLUSION                                                         57

5.2        RECOMMENDATION                                              58

5.3        LIMITATION OF THE STUDY                                   59

BIBLIOGRAPY                                                               61

CHAPTER ONE

1.0        INTRODUCTION

        Capital investment decision is a business entity is a function of the top management in an organization the taking of decision to in primary is predetermination of organization goal and constant evaluation of the feasible strategies used for attainment of goals and objective. This decision involves the commitments of capital into investment or projects that have long term span, or allocation of capital to long term asset, that would yield benefit in the future. Due to  the fact that future benefits are uncertain, investment decision involve risk and uncertainty. Therefore investment proposals should be evaluated in terms of both return or profit and risk, these two factors affect the firm’s market value.

        The process of planning and managing a firm’s long term investment is referred to as capital budgeting, which would be treated later in this book. One of the function of the financial manager is to evaluation the expected cash inflows, that is cash expected to receive from investment when the cash is expected (the time )and compare it with expected cash outflow, that is expenditure on the investment. Also the financial manager is expected to evaluate the size, timing and risk of future cash flows before the final selection of investment/ projects.