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Capital Budgeting
Reviewed by Will Kenton
Updated May 1, 2018

What is Capital Budgeting

Capital budgeting is the process in which a business determines and evaluates potential
large expenses or investments. These expenditures and investments include projects such as
building a new plant or investing in a long-term venture. Often, a company assesses a
prospective project's lifetime cash inflows and outflows to determine whether the potential
returns generated meet a sufficient target benchmark, also known as "investment appraisal."

Capital Budgeting

BREAKING DOWN Capital Budgeting

Ideally, businesses should pursue all projects and opportunities that enhance shareholder
value. However, because the amount of capital available for new projects is limited,
management needs to use capital budgeting techniques to determine which projects will yield
the most return over an applicable period. Various methods of capital budgeting can include
throughput analysis, net present value, internal rate of return, discounted cash flow and
payback period.

There are three popular methods for deciding which projects should receive investment funds
over other projects. These methods are throughput analysis, DCF analysis and payback period
analysis.

Capital Budgeting with Throughput Analysis

One measures throughput as the amount of material passing through a system. Throughput
analysis is the most complicated form of capital budgeting analysis, but is also the most
accurate in helping managers decide which projects to pursue. Under this method, the entire
company is a single, profit-generating system.

The analysis assumes that nearly all costs in the system are operating expenses, that a
company needs to maximize the throughput of the entire system to pay for expenses, and that
the way to maximize profits is to maximize the throughput passing through a bottleneck
operation. A bottleneck is the resource in the system that requires the longest time in
operations. This means that managers should always place higher consideration on capital
budgeting projects that impact and increase throughput passing though the bottleneck.

Capital Budgeting Using DCF Analysis

DCF analysis is similar or the same to NPV analysis in that it looks at the initial cash outflow
needed to fund a project, the mix of cash inflows in the form of revenue, and other future
outflows in the form of maintenance and other costs. These costs, save for the initial outflow,
are discounted back to the present date. The resulting number of the DCF analysis is the
NPV. Projects with the highest NPV should rank over others unless one or more are mutually
exclusive.

The Most Simple Form of Capital Budgeting

Payback analysis is the simplest form of capital budgeting analysis and is therefore the least
accurate. However, managers still use this method because it's quick and can give managers a
"back of the napkin" understanding of the efficacy of a project or group of projects. This
analysis calculates how long it will take to recoup the investment of a project. One can
identify the payback period by dividing the initial investment by the average yearly cash
inflow.
Capital Budgeting
July 1 2015 Written By: EduPristine

source: mid-marketpulse
WHAT IS CAPITAL BUDGETING?

Capital budgeting is a company’s formal process used for evaluating potential expenditures
or investments that are significant in amount. It involves the decision to invest the current
funds for addition, disposition, modification or replacement of fixed assets. The large
expenditures include the purchase of fixed assets like land and building, new equipments,
rebuilding or replacing existing equipments, research and development, etc. The large
amounts spent for these types of projects are known as capital expenditures. Capital
Budgeting is a tool for maximizing a company’s future profits since most companies are able
to manage only a limited number of large projects at any one time.

Capital budgeting usually involves calculation of each project’s future accounting profit by
period, the cash flow by period, the present value of cash flows after considering time value
of money, the number of years it takes for a project’s cash flow to pay back the initial cash
investment, an assessment of risk, and various other factors.

Capital is the total investment of the company and budgeting is the art of building
budgets.

FEATURES OF CAPITAL BUDGETING

1) It involves high risk

2) Large profits are estimated

3) Long time period between the initial investments and estimated returns

CAPITAL BUDGETING PROCESS:

A) Project identification and generation:

The first step towards capital budgeting is to generate a proposal for investments. There could
be various reasons for taking up investments in a business. It could be addition of a new
product line or expanding the existing one. It could be a proposal to either increase the
production or reduce the costs of outputs.

B) Project Screening and Evaluation:

This step mainly involves selecting all correct criteria’s to judge the desirability of a
proposal. This has to match the objective of the firm to maximize its market value. The tool
of time value of money comes handy in this step.

Also the estimation of the benefits and the costs needs to be done. The total cash inflow and
outflow along with the uncertainties and risks associated with the proposal has to be analyzed
thoroughly and appropriate provisioning has to be done for the same.
C) Project Selection:

There is no such defined method for the selection of a proposal for investments as different
businesses have different requirements. That is why, the approval of an investment proposal
is done based on the selection criteria and screening process which is defined for every firm
keeping in mind the objectives of the investment being undertaken.

Once the proposal has been finalized, the different alternatives for raising or acquiring funds
have to be explored by the finance team. This is called preparing the capital budget. The
average cost of funds has to be reduced. A detailed procedure for periodical reports and
tracking the project for the lifetime needs to be streamlined in the initial phase itself. The
final approvals are based on profitability, Economic constituents, viability and market
conditions.

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D) Implementation:

Money is spent and thus proposal is implemented. The different responsibilities like
implementing the proposals, completion of the project within the requisite time period and
reduction of cost are allotted. The management then takes up the task of monitoring and
containing the implementation of the proposals.

E) Performance review:

The final stage of capital budgeting involves comparison of actual results with the standard
ones. The unfavorable results are identified and removing the various difficulties of the
projects helps for future selection and execution of the proposals.

FACTORS AFFECTING CAPITAL BUDGETING:

Availability of Funds Working Capital
Structure of Capital Capital Return
Management decisions Need of the project
Accounting methods Government policy
Taxation policy Earnings
Lending terms of financial institutions Economic value of the project

CAPITAL BUDGETING DECISIONS:

The crux of capital budgeting is profit maximization. There are two ways to it; either increase
the revenues or reduce the costs. The increase in revenues can be achieved by expansion of
operations by adding a new product line. Reducing costs means representing obsolete return
on assets.

Accept / Reject decision – If a proposal is accepted, the firm invests in it and if rejected the
firm does not invest. Generally, proposals that yield a rate of return greater than a certain
required rate of return or cost of capital are accepted and the others are rejected. All
independent projects are accepted. Independent projects are projects that do not compete with
one another in such a way that acceptance gives a fair possibility of acceptance of another.

Mutually exclusive project decision – Mutually exclusive projects compete with other
projects in such a way that the acceptance of one will exclude the acceptance of the other
projects. Only one may be chosen. Mutually exclusive investment decisions gain importance
when more than one proposal is acceptable under the accept / reject decision. The acceptance
of the best alternative eliminates the other alternatives.

Capital rationing decision – In a situation where the firm has unlimited funds, capital
budgeting becomes a very simple process. In that, independent investment proposals yielding
a return greater than some predetermined level are accepted. But actual business has a
different picture. They have fixed capital budget with large number of investment proposals
competing for it. Capital rationing refers to the situation where the firm has more acceptable
investments requiring a greater amount of finance than that is available with the firm.
Ranking of the investment project is employed on the basis of some predetermined criterion
such as the rate of return. The project with highest return is ranked first and the acceptable
projects are ranked thereafter.
Capital budgeting
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Capital budgeting, and investment appraisal, is the planning process used to determine
whether an organization's long term investments such as new machinery, replacement of
machinery, new plants, new products, and research development projects are worth the
funding of cash through the firm's capitalization structure (debt, equity or retained earnings).
It is the process of allocating resources for major capital, or investment, expenditures.[1] One
of the primary goals of capital budgeting investments is to increase the value of the firm to
the shareholders.

Many formal methods are used in capital budgeting, including the techniques such as
  Accounting rate of return
 Average accounting return
 Payback period
 Net present value
 Profitability index
 Internal rate of return
 Modified internal rate of return
 Equivalent annual cost
 Real options valuation

These methods use the incremental cash flows from each potential investment, or project.
Techniques based on accounting earnings and accounting rules are sometimes used - though
economists consider this to be improper - such as the accounting rate of return, and "return
on investment." Simplified and hybrid methods are used as well, such as payback period and
discounted payback period.

Contents

 1 Net present value

 2 Internal rate of return
 3 Equivalent annuity method
 4 Real options
 5 Ranked projects
 6 Funding sources
 7 Need
 8 See also
 9 External links and references

Net present value

Main article: Net present value

'Net Present value:'

Project classifications:- As the name suggested this method - recognize time value of money
which is crucial to the undertaking of long-term capital projects. This is discounted cash flow
approach to capital budgeting in which all cash flow are discounted to present value.

Capital budgeting projects are classified as either Independent Projects or Mutually Exclusive
Projects. An Independent Project is a project whose cash flows are not affected by the
accept/reject decision for other projects. Thus, all Independent Projects which meet the
Capital Budgeting criterion should be accepted.

Mutually exclusive projects are a set of projects from which at most one will be accepted. For
example, a set of projects which are to accomplish the same task. Thus, when choosing
between "mutually exclusive projects", more than one project may satisfy the capital
budgeting criterion. However, only one, i.e., the best, project can be accepted.
Of these three, only the net present value and internal rate of return decision rules consider all
of the project's cash flows and the time value of money. As we shall see, only the net present
value decision rule will always lead to the correct decision when choosing among mutually
exclusive projects. This is because the net present value and internal rate of return decision
rules differ with respect to their reinvestment rate assumptions. The net present value
decision rule implicitly assumes that the project's cash flows can be reinvested at the firm's
cost of capital, whereas the internal rate of return decision rule implicitly assumes that the
cash flows can be reinvested at the project's IRR. Since each project is likely to have a
different IRR, the assumption underlying the net present value decision rule is more
reasonable.

Internal rate of return

Main article: Internal rate of return

The internal rate of return (IRR) is defined as the discount rate that gives a net present
value (NPV) of zero. It is a commonly used measure of investment efficiency.

The IRR method will result in the same decision as the NPV method for (non-mutually
exclusive) projects in an unconstrained environment, in the usual cases where a negative cash
flow occurs at the start of the project, followed by all positive cash flows. In most realistic
cases, all independent projects that have an IRR higher than the hurdle rate should be
accepted. Nevertheless, for mutually exclusive projects, the decision rule of taking the project
with the highest IRR - which is often used - may select a project with a lower NPV.

In some cases, several zero NPV discount rates may exist, so there is no unique IRR. The
IRR exists and is unique if one or more years of net investment (negative cash flow) are
followed by years of net revenues. But if the signs of the cash flows change more than once,
there may be several IRRs. The IRR equation generally cannot be solved analytically but
only via iterations.

One shortcoming of the IRR method is that it is commonly misunderstood to convey the
actual annual profitability of an investment. However, this is not the case because
intermediate cash flows are almost never reinvested at the project's IRR; and, therefore, the
actual rate of return is almost certainly going to be lower. Accordingly, a measure called
Modified Internal Rate of Return (MIRR) is often used.

Despite a strong academic preference for NPV, surveys indicate that executives prefer IRR
over NPV[citation needed], although they should be used in concert. In a budget-constrained
environment, efficiency measures should be used to maximize the overall NPV of the firm.
Some managers find it intuitively more appealing to evaluate investments in terms of
percentage rates of return than dollars of NPV.

Equivalent annuity method

Main article: Equivalent annual cost

The equivalent annuity method expresses the NPV as an annualized cash flow by dividing it
by the present value of the annuity factor. It is often used when assessing only the costs of
specific projects that have the same cash inflows. In this form it is known as the equivalent
annual cost (EAC) method and is the cost per year of owning and operating an asset over its
entire lifespan.

It is often used when comparing investment projects of unequal lifespans. For example, if
project A has an expected lifetime of 7 years, and project B has an expected lifetime of 11
years it would be improper to simply compare the net present values (NPVs) of the two
projects, unless the projects could not be repeated.

The use of the EAC method implies that the project will be replaced by an identical project.

Alternatively the chain method can be used with the NPV method under the assumption that
the projects will be replaced with the same cash flows each time. To compare projects of
unequal length, say 3 years and 4 years, the projects are chained together, i.e. four repetitions
of the 3-year project are compare to three repetitions of the 4-year project. The chain method
and the EAC method give mathematically equivalent answers.

The assumption of the same cash flows for each link in the chain is essentially an assumption
of zero inflation, so a real interest rate rather than a nominal interest rate is commonly used in
the calculations.

Real options
Main article: Real options analysis

Real options analysis has become important since the 1970s as option pricing models have
gotten more sophisticated. The discounted cash flow methods essentially value projects as if
they were risky bonds, with the promised cash flows known. But managers will have many
choices of how to increase future cash inflows, or to decrease future cash outflows. In other
words, managers get to manage the projects - not simply accept or reject them. Real options
analysis tries to value the choices - the option value - that the managers will have in the future
and adds these values to the NPV.

Ranked projects

The real value of capital budgeting is to rank projects. Most organizations have many projects
that could potentially be financially rewarding. Once it has been determined that a particular
project has exceeded its hurdle, then it should be ranked against peer projects (e.g. - highest
Profitability index to lowest Profitability index). The highest ranking projects should be
implemented until the budgeted capital has been expended.

Funding sources

Capital budgeting investments and projects must be funded through excess cash provided
through the raising of debt capital, equity capital, or the use of retained earnings. Debt capital
is borrowed cash, usually in the form of bank loans, or bonds issued to creditors. Equity
capital are investments made by shareholders, who purchase shares in the company's stock.
Retained earnings are excess cash surplus from the company's present and past earnings.
Need

1. A large sum of money is involved which influences the profitability of the firm making capital
budgeting an important task.
2. Long term investments, once made, cannot be reversed without a significant loss of invested
capital. The investment becomes sunk, and mistakes, rather than being readily rectified,
must often be borne until the firm can be withdrawn through depreciation charges or
liquidation. It influences the whole conduct of the business for the years to come.
3. Investment decisions are the based on which the profit will be earned and probably
measured through the return on the capital. A proper mix of capital investment is quite
important to ensure adequate rate of return on investment, calling for the need of capital
budgeting.
4. The implication of long term investment decisions are more extensive than those of short
run decisions because of time factor involved, capital budgeting decisions are subject to the
higher degree of risk and uncertainty than short run decision.[2]

See also

 Operating budget
 Engineering Economics
 Engineering economics (civil engineering)

External links and references

1.

 O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River,
New Jersey 07458: Pearson Prentice Hall. p. 375. ISBN 0-13-063085-3.

2.  Varshney, R.L.; K.L. Maheshwari (2010). Manegerial Economics. 23 Daryaganj, New Delhi
110002: Sultan Chand & Sons. p. 881. ISBN 978-81-8054-784-3.

 International Good Practice: Guidance on Project Appraisal Using Discounted Cash Flow[dead
link]
, International Federation of Accountants, June 2008, ISBN 978-1-934779-39-2
 Prospective Analysis: Guidelines for Forecasting Financial Statements, Ignacio Velez-Pareja,
Joseph Tham, 2008
 To Plug or Not to Plug, that is the Question: No Plugs, No Circularity: A Better Way to
Forecast Financial Statements, Ignacio Velez-Pareja, 2008
 A Step by Step Guide to Construct a Financial Model Without Plugs and Without Circularity
for Valuation Purposes, Ignacio Velez-Pareja, 2008
 Long-Term Financial Statements Forecasting: Reinvesting Retained Earnings, Sergei
Cheremushkin, 2008
What is capital budgeting?
Capital budgeting is a process used by companies for evaluating and ranking potential
expenditures or investments that are significant in amount. The large expenditures could
include the purchase of new equipment, rebuilding existing equipment, purchasing delivery
vehicles, constructing additions to buildings, etc. The large amounts spent for these types of
projects are known as capital expenditures.

Capital budgeting usually involves the calculation of each project's future accounting profit
by period, the cash flow by period, the present value of the cash flows after considering the
time value of money, the number of years it takes for a project's cash flow to pay back the
initial cash investment, an assessment of risk, and other factors.

Capital budgeting is a tool for maximizing a company's future profits since most companies
are able to manage only a limited number of large projects at any one time.

ACCOUNTINGCOACH.COM

What is Capital Budgeting?

Home » Accounting Dictionary » What is Capital Budgeting?

Definition: Capital budgeting is a method of analyzing and comparing substantial future

investments and expenditures to determine which ones are most worthwhile. In other words,
it’s a process that company management uses to identify what capital projects will create the
biggest return compared with the funds invested in the project. Each project is ranked by its
potential future return, so the company management can choose which one to invest in first.

What Does Capital Budgeting Mean?

Most business’ future goals include expanding their operations. This is difficult to do if the
company doesn’t have enough capital or fixed assets. That is where capital budgeting comes
into play.

Capital budgets or capital expenditure budgets are a way for a company’s management to
plan fixed asset sales and purchases. Usually these budgets help management analyze
different long-term strategies that the company can take to achieve its expansion goals. In
other words, the management can decide what assets it might need to sell or buy in order to
expand the company. To make this decision, management typically uses these three main
analyzes in the budgeting process: throughput analysis, discounted cash flows analysis, and
payback analysis.
Example

Obviously, capital budgeting involves difficult decisions. In most cases buying fixed assets is
expensive and cannot be easily undone. The management has to decide to spend cash in the
bank, take out a loan, or sell existing assets to pay for the new ones. Each one of these
decisions comes with the eternal question: will they receive the proper return on investment?
Because when you think about it, buying new fixed assets is no different than putting money
any other investment. The company is buying equipment hoping that is will pay off in the
future.

That is why many managers used the present value of future cash flows when deciding what
to buy. Present value dollars will help them analyze the current and future cash inflows and
outflows equally to come up with the best plan for the future.

MYACCOUNTINGCOURSE.COM

Capital budgeting
February 21, 2018

Definition of Capital Budgeting

Capital budgeting is the process that a business uses to determine which proposed fixed asset
purchases it should accept, and which should be declined. This process is used to create a
quantitative view of each proposed fixed asset investment, thereby giving a rational basis for
making a judgment.

Capital Budgeting Methods

There are a number of methods commonly used to evaluate fixed assets under a formal
capital budgeting system. The more important ones are:

 Net present value analysis. Identify the net change in cash flows associated with a
fixed asset purchase, and discount them to their present value. Then compare all
proposed projects with positive net present values, and accept those with the highest
net present values until funds run out.
 Constraint analysis. Identify the bottleneck machine or work center in a production
environment and invest in those fixed assets that maximize the utilization of the
bottleneck operation. Under this approach, you are less likely to invest in areas
 downstream from the bottleneck operation (since they are constrained by the
bottleneck operation) and more likely to invest upstream from the bottleneck (since
additional capacity there makes it easier to keep the bottleneck fully supplied with
inventory).
 Payback period. Determine the period required to generate sufficient cash flow from a
project to pay for the initial investment in it. This is essentially a risk measure, for the
focus is on the period of time that the investment is at risk of not being returned to the
company.
 Avoidance analysis. Determine whether increased maintenance can be used to prolong
the life of existing assets, rather than investing in replacement assets. This analysis
can substantially reduce a company's total investment in fixed assets.

The Importance of Capital Budgeting

The amount of cash involved in a fixed asset investment may be so large that it could lead to
the bankruptcy of a firm if the investment fails. Consequently, capital budgeting is a
mandatory activity for larger fixed asset proposals. This is less of an issue for smaller
investments; in these latter cases, it is better to streamline the capital budgeting process
substantially, so that the focus is more on getting the investments made as expeditiously as
possible; by doing so, the operations of profit centers are not hindered by the analysis of their
fixed asset proposals.

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 Capital Budgeting
Capital
Budgeting

Concepts
Capital Budgeting is the process by which the firm decides which long-
term investments to make. Capital Budgeting projects, i.e., potential
Payback long-term investments, are expected to generate cash flows over several
years. The decision to accept or reject a Capital Budgeting project
depends on an analysis of the cash flows generated by the project and its
Net Present
cost. The following three Capital Budgeting decision rules will be
Value presented:

 Payback Period
Internal Rate of
 Net Present Value (NPV)
Return  Internal Rate of Return (IRR)

A Capital Budgeting decision rule should satisfy the following criteria:

Capital
Budgeting  Must consider all of the project's cash flows.
Equations  Must consider the Time Value of Money
 Must always lead to the correct decision when choosing among
Mutually Exclusive Projects.
Tools &
Problems
Project Classifications

Capital Capital Budgeting projects are classified as either Independent

Budgeting Projects or Mutually Exclusive Projects.
Calculator
An Independent Project is a project whose cash flows are not
affected by the accept/reject decision for other projects. Thus, all
Capital Independent Projects which meet the Capital Budgeting critierion
Budgeting should be accepted.
Exercise
Mutually Exclusive Projects are a set of projects from which at most
 one will be accepted. For example, a set of projects which are to
Capital accomplish the same task. Thus, when choosing between "Mutually
Budgeting Quiz Exclusive Projects" more than one project may satisfy the Capital
Budgeting criterion. However, only one, i.e., the best project can be
accepted.

Of these three, only the Net Present Value and Internal Rate of Return
decision rules consider all of the project's cash flows and the Time Value
of Money. As we shall see, only the Net Present Value decision rule will
always lead to the correct decision when choosing among Mutually
Exclusive Projects. This is because the Net Present Value and Internal
Rate of Return decision rules differ with respect to their Reinvestment
Rate Assumptions. The Net Present Value decision rule implicitly
assumes that the project's cash flows can be reinvested at the firm's Cost
of Capital, whereas, the Internal Rate of Return decision rule implicitly
assumes that the cash flows can be reinvested at the projects IRR. Since
each project is likely to have a different IRR, the assumption underlying
the Net Present Value decision rule is more reasonable.

Cost of Capital

The firm's Cost of Capital is the discount rate which should be used in
Capital Budgeting. The Cost of Capital reflects the firm's cost of
obtaining capital to invest in long term assets. Thus it reflects a
weighted average of the firm's cost of debt, cost of preferred stock, and
cost of common stock.

Concepts

 Payback Period
 Net Present Value (NPV)
 Internal Rate of Return (IRR)
 Equations

Tools and Problems

 Capital Budgeting Calculator

 Capital Budgeting Exercise
 Capital Budgeting Quiz

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Concepts of Capital Budgeting

Before proceeding with the discussion of the capital budgeting process, it is necessary to
introduce a number of terms and concepts encountered in subsequent chapters.

Cost of Capital

A firm’s cost of capital is defined as the cost of the funds supplied to it. It is also termed the
required rate of return because it specifies the minimum necessary rate of return required by
the firm’s investors. In this context, the cost of capital provides the firm with a basis for
choosing among various capital investment projects. In this and the following two chapters, it
is assumed that the cost of capital is a known value.

How Projects Are Classified

A firm usually encounters several different types of projects when making capital expenditure
decisions, including independent projects, mutually exclusive projects, and contingent
projects. As is demonstrated in previous Chapter , project classification can influence the
investment decision process.

Independent Projects

An independent project is one whose acceptance or rejection does not directly eliminate
other projects from consideration. For example, a firm may want to install a new telephone
communications system in its headquarters and replace a drill press during approximately the
same time. In the absence of a constraint on the availability of funds, both projects could be
adopted if they meet minimum investment criteria.

Mutually Exclusive Projects

A mutually exclusive project is one whose acceptance precludes the acceptance of one or
more alternative proposals. Because two mutually exclusive projects have the capacity to
perform the same function for a firm, only one should be chosen. For example, BMW was
faced with deciding whether it should locate its U.S. manufacturing complex in Spartanburg,
South Carolina, or at one of several competing North Carolina sites. It ultimately chose the
Spartanburg site; this precluded other alternatives.

Contingent Projects

A contingent project is one whose acceptance is dependent on the adoption of one or more
other projects. For example, a decision by Nucor to build a new steel plant in North Carolina
is contingent upon Nucor investing in suitable air and water pollution control
equipment.When a firm is considering contingent projects, it is best to consider together all
projects that are dependent on one another and treat them as a single project for purposes of
evaluation.

Availability of Funds

When a firm has adequate funds to invest in all projects that meet some capital budgeting
selection criterion, such as has been true for Philip Morris (now part of Altria Group) in
recent years, the firm is said to be operating without a funds constraint. Frequently, however,
the total initial cost of the acceptable projects in the absence of a funds constraint is greater
than the total funds the firm has available to invest in capital projects.This necessitates
capital rationing, or setting limits on capital expenditures, and results in some special capital
budgeting problems.

Capital Budgeting BASIC TERMS IN CAPITAL BUDGETING Capital Expenditures It refers to substantial
outlay of funds the purpose of which is to lower costs and increase net income for several years in
the future. It includes expenditures that tie up capital inflexibility for long periods. It covers not only
outlays for fixed assets but also expenditures for major research on new products and methods for
advertising that has cumulative effects. Capital expenditures may be classified into the following: 
Replacement Investments – this refers to investments on replacement of worn-out or obsolete
facilities;  Expansion Investments – provides additional facilities to increase the production and/or
distribution capabilities of the firm;  Product-line or new market investments – on new products or
new markets, and on improvement of old products;  Investments in safety and/or environmental
projects – necessary to comply with government orders, labor agreements, and insurance policy
terms  Strategic Investments – designed to accomplish the overall objectives of the firm.  Other
Investments – This catch-all term includes office buildings, parking lots, and executive
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