Capital Investment Procedures for FEMYSO

Sammanfattning: Date: 2008-06-05 Level: Bachelor Thesis in Business Administration EF0703, 15 ECTS Credits. Authors: Longinus Duru (Stockholm), Francis O.Oluduro (Västerås) and Mofid Al Jaafar (Västerås) Title: Capital Investment Procedures for FEMYSO Problem Area: Undertaking an investment by FEMYSO involves weighing up the risk against the returns but still capital investment decision are still one of the most undertaken decisions by organization managers because it involves commitment of huge amount of money, which will affect the business over time. FEMYSO is embarking on a capital project at the hearts of Brussels but there is still a problem associated with the profitability of such venture. Purpose: The purpose of this study is to provide Capital Investment guidelines and procedures for FEMYSO and to show how it can maximize profit through decision-making. Furthermore show the role of risk and interest rate in the investment. Methodology/Design/Approach: This paper used theoretical framework of existing investment theories to assess investment opportunity for FEMYSO and other organizations. The role of Mintzberg et al. Rational model of decision-making in investments was analyzed. This research paper went further to provide deeper insights into capital investment process by evaluating the net present value of an investment and determining the risk associated with investments. Research Limitation/Implications: This study is limited to FEMYSO and other nonprofit organizations that want to assess Capital Investment Projects. Conclusion and Result: The more you wait to earn a dollar, the more heavily you discount for it because of the time value of money. Good management decision in FEMYSO and other related organizations will lead to profit maximization. The time value of money problem can be solved by heavily discounting for the present value. Profitability of capital projects will depend on the future interest rate, which is uncertain and subject to risk.