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China Foreign Investment

In: Business and Management

Submitted By mba2017
Words 1720
Pages 7
1. In business we have to take many financial decisions which can put a deep impact on the survival and growth of the business. A wrong decision may be proved deteriorate for the business. From many financial decision that we have to make, the most important is of capital budgeting. Capital budgeting refers to the planning of long term capital expenditure and requires due consideration. The sum involve in this type of decision is very large and this type of decisions normally cannot be reversed. So it is imperative to properly analysis each factor which may affect capital investment and the risk associated with the factor must be adjusted when determining the feasibility of the project.
Identification of all the risk factors involved in the project is essential to determine the return required from the project. This process of identification of every risk factor that may arise becomes more complicated in case of an international project because the risk factors differ from country to country and there are some risk factors which are unique to a country. Required rate of return on an investment project is the rate of return which investors who have contributed their money for the project expects to earn from the project. There is a direct relationship between the risk involved in a project and return required on the capital invested in the project. Higher the risk higher will be the expectation of the investors of return from the project for bearing additional risk.
Capital that is invested in capital investments can be arranged through different sources. Capital can be arranged through equity capital, debt capital or retained earnings. Equity capital is the capital that is arranged by issue of new shares for the investment. Investors when invest money in the stock of company they expect return on their money. This expectation of stockholders to get return on

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