When you are an executive at a company and are approached by someone who is proposing that the company make a capital investment expenditure, one HUGE consideration you need to remember is that each and every number except maybe the amount of the initial investment is a forecast. That means that the person presenting you with the proposal for investment has made a lot of assumptions. The numbers are not guaranteed.
What questions would you ask of someone who was asking for you to make a capital investment? When looking over their calculations for payback period, NPV, IRR, MIRR, or any of the other concepts we’re covering this week, what questions would you ask to be sure you agreed with their proposal and analysis?
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