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    Capital expenditure decisions

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    Imagine that you are the administrator of a nonprofit community hospital. You have been approached by medical staff from two different departments (for example, pediatrics and radiation therapy) who are equally convinced that their respective areas of specialty need major new pieces of high technology capital equipment that will greatly enhance patient care in each department. Knowing your hospital has limited resources for capital expenditures, what information do you need to gather? Once you have gathered this information, how will you go about deciding which department, if either, should get the equipment?

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    The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision. But this is not just a ...

    Solution Summary

    This explains the capital expenditure decisions