Question

‘Zenith Mall’ is a famous shopping mall in Mumbai, owned by ‘Pinnacle Group'. It is very popular for its international and national brands of fashionable clothes, restaurants, cinema halls and food courts.

The management of Pinnacle Group has decided to open a new branch of the mall in Pune. This decision was very crucial for the management as it involves huge amounts.

1. Identify and state the financial decision involved in the above case.
2. State any two factors affecting the decision identified in (i) above.

Answer 1

1. Investment Decisions:
   1. Investment decision refers to the careful allocation of a company's resources, selecting the most cost-effective solution that will provide the investors with the maximum potential return.
   2. The many resources that are available to an organisation are limited but can be used in other ways. To make the most money possible, a company must make sensible investment decisions.
   3. Investment decisions are decisions on how the firm's funds are invested in various assets, or investment proposals.
2. Factors Affecting Capital Budgeting Decisions are as follows:
   1. Cash Flows of the Project: For making the best proposal, a series of cash receipts and payments over the life of an investment proposal are evaluated and analysed.
   2. The Rate of Return: To choose the best proposal, the projected returns from each plan and the risk involved are calculated.
   3. The Investment Criteria Involved: Based on capital budgeting approaches, various investment plans are analysed. These include calculations for investment size, cash flows, rate of return, and so on.