Capital investment decisions that are strategic in nature:

Question

Quizplus · Accepted Answer

Strategic capital investment decisions often involve long-term commitments, such as entering new markets, developing new products, or building new facilities. These decisions require managers to consider a broad range of factors, such as market conditions, technological developments, and competitive pressures. Estimating these factors is difficult, and there is a high degree of uncertainty involved. As such, strategic capital investment decisions cannot be easily handled by traditional capital budgeting methods, such as the accrual accounting rate-of-return method. Some scholars refer to these decisions as 'real options' because they represent options to undertake future strategic actions, subject to uncertain market conditions.

Capital Investment Decisions That Are Strategic in Nature