Investment Decisions in Business Finance

Investment Decisions in Business Finance

Description/Paper Instructions

Investment Decisions in Business Finance: The Economic Perspective

Investment decisions are a crucial aspect of business finance. They involve determining how a company should allocate its financial resources to maximize returns and achieve its long-term objectives. From an economic perspective, investment decisions involve a trade-off between current consumption and future consumption.

When a company decides to invest in a project, it is foregoing the opportunity to use those funds for other purposes, such as paying dividends or reducing debt. The potential benefits of the investment must therefore outweigh the costs of forgoing those other uses of funds.

The first step in making an investment decision is to identify potential investment opportunities. This can be done through market research, feasibility studies, and other analytical tools. Once potential investments have been identified, the company must assess their potential profitability and risks.

There are many different methods for assessing the profitability of an investment, including discounted cash flow analysis, net present value, and internal rate of return. These methods all involve estimating the expected future cash flows from the investment, discounting them back to their present value, and comparing them to the initial cost of the investment.

In addition to profitability, it is important to consider the risks associated with an investment. Risk can come from a variety of sources, including changes in market conditions, technological obsolescence, and regulatory changes. To manage these risks, companies may use tools such as diversification, insurance, and hedging.

Once a company has assessed the potential profitability and risks of an investment, it must make a decision about whether to proceed with the investment or not. This decision will depend on a variety of factors, including the company’s overall financial position, its strategic objectives, and its tolerance for risk.

In some cases, a company may decide to invest in a project even if it is not expected to be immediately profitable. This may be done if the project is expected to generate long-term strategic benefits, such as increased market share or enhanced brand recognition.

When making investment decisions, it is important to consider the broader economic context in which the company operates. Economic conditions can have a significant impact on the potential profitability and risks of an investment. For example, a recession may reduce demand for a company’s products, making investments in new production facilities less attractive.

In conclusion, investment decisions are a critical aspect of business finance. They involve balancing potential profits against the costs of forgoing other uses of financial resources. To make informed investment decisions, companies must carefully assess the potential profitability and risks of each investment opportunity. They must also consider the broader economic context in which they operate, as economic conditions can significantly impact the potential profitability and risks of investments.

Investment Decisions in Business Finance

RUBRIC QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points:  Student failed to submit the final paper. 20 points out of 50:  The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50:  The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately.  Elements of the required response may also be lacking. 40 points out of 50:  The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples.  The answer is complete. 50 points:  The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples.  No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points:  Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points:  Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points:  References to scholarly sources are occasionally given; many statements seem unsubstantiated.  Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points:  Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented.  APA 6th Edition is used with only a few minor errors.  There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points:  Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented.  APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points:  Student failed to submit the final paper. 5 points out of 20:  The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors  10 points out 20:  The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20:  The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points:  The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points:  Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements.  The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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