Investment Projects
... First the largest type of project, around which project analysis grew up, involves new investment. ... Secondly, there are expansion projects, which involve repeating or extending an existing economic activity with the same output, technology and organization. Thirdly, there are updating projects, which involve replacing or changing some elements in an existing activity without a major change of output. Updating projects involve some change in technology but within the context of an existing, though possibly reformulated organization. The explanation of these three types of projects will specify when do a company has to invest, update, or expand. Factors of Project Analysis Certain factors are focused on when decided whether or not an investment project should be implemented. These key factors are required in all of the types of investment projects. The four most important key factors are investment costs, operating costs, working capital costs, and benefits from the investment project. Project investment costs can be divided into different subcategories, such as initial expenditures, the costs required to start the investment project, replacement expenditures, the costs required to operate the investment project, and residual values, the costs that will come into effect once the investment project has been completed. Project investment costs will influence a large portion of the decision whether or not to accept the investment project, because if the costs are too large, and outbalance the benefits, it would not be an ideal investment project to welcome. ... The investment project must have the appropriate funding available at the time of exertion. The working capital, or stock, is what gives the company its resources to fulfill the investment projects. This stock has to be at its highest level during the beginning stages of the investment project. This would allow the stock to maintain value throughout the process of the investment project, end when the investment project is complete. The benefits from the investment project must be higher than all of the costs involved creating some sort of revenue or value. Not all benefits lie directly on the outcome of the investment project. ... New Investment Project The most important type of investment project is a new investment project. New investment financial projects are projects made by a company to either create a new line of products or to portray any kind of new business idea that a company is trying to develop. These projects are used to create a new line to increase the revenue of a company. A company can put investment costs, operating costs, working capital costs, and benefits from the new investment financial project are put into terms when deciding on whether or not to accept this new project.