ABSTRACT

The investment decisions of a firm are generally known as the capital budgeting or capital expenditure decisions. An investment decision of a firm is the act to invest its current fund most effectively in long-term assets in anticipation of an expected flow of benefits over a series of years. Investment analysis comprises of diverse importance of the firm such as influencing the firms growth in short and long run, it affects the risk of the firm; it also involves commitment of large amount of fund which is irreversible or reversible substantial loss. However, in evaluating the investment, the three criteria are involved such as: Estimation of cash flow, Estimation of the required rates of return, Application of a decision rule making the choice.