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Capital Investment Decisions / Term Loans
Define capital investment decision in banking context.
Long-term decision to set up plant, expand capacity, replace machinery, or launch product; ties up funds for years.
What is the central question every appraisal method must address?
Is future stream of cash inflows worth the upfront cash outflow?
Name two Discounted Cash Flow (DCF) methods.
Net Present Value (NPV) and Internal Rate of Return (IRR).
Name two Non-Discounted Cash Flow methods.
Payback Period method and Accounting Rate of Return (ARR) method.
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