Chapter A, Problem 1RQ

What are the two most important factors an accountant must estimate in the capital investment decision?

To determine

Determine the two most important factors an accountant should take into consideration while making an investment decision.

Explanation of Solution

Capital investment decision:

Capital investment decisions are the decisions taken by the management with respect to the procurement of capital assets.

Two important things to take into consideration:

The timing of the investment is very important for the decision related to capital investment. The amount invested will remain invested for a specific duration. The opportunity cost and the risk involved is present in having the funds tied up in any capital investment. Hence, the timing and the amount of the project both are taken into consideration for determining the value of the project.