Capital investment involves spending cash now for returns in the future. There are six steps to the capital investment process: searching for opportunities, screening alternatives, analyzing feasible alternatives, evaluating alternatives, authorizing the project, and implementing and controlling the project. There are several kinds of capital investment projects, including balancing projects to improve capacity utilization, modernization projects to update old equipment, replacement projects to substitute obsolete assets, expansion projects to increase production capacity, and diversification projects to enter new business lines unrelated to existing operations. Projects can also be classified based on their national or industry scope, technology level, size, ownership, and purpose.

1. Capital investment process and kinds and
classification of the project
Prepared by:
Khambholiya Manan (25) Submitted to :- K.K.P.I.M.S.-Amreli

2. • Capital investment involves a cash
outflow in the immediate future in
anticipation of returns at a future
date.
• Capital investment decisions are
decisions about when and how to spend
on capital facilities and other long-
term projects.

3. 1. Search for Investment Opportunities
2. Screening the Alternatives
3.Analysis of Feasible Alternatives
4. Evolution of Alternatives
5. Authorization
6. Implementation and Control

4. Kinds of projects

5. • Balancing projects:-
when the capacity utilization of the plant and
machinery is unbalanced due to utilized capacity
in some units, the balancing equipment is
installed to remove the bottlenecks and to
increase the capacity utilization of total plant.
by installing balancing equipment, there would
be free flow in the process and continuous
production is ensured and there will be more
revenues through higher output and attendant
value addition.

6. • Modernization project:-
due to
technological development, wear and tear, the old
plant and machinery that was installed several
years back, would require modernization. The old
plant may cause high cost of production, frequent
interruption in plant running, high cost of
maintenance, low quality products. In
modernization, old machine are removed and new
machines are installed in its place in order to cope
with dynamic and competitive environment. The
modernization of plant will reduce the cost of
production, increase productivity and improve the
morale of the employees. It will also improve the
production method, increase the product quality.

7. • Replacement project:-
replacement does not
imply a like for like substitution. Replacement of an
existing assets wit more economic one. if any
equipment is deteriorated due to obsolescence and
its economic life is completed, it should be replaced
with a new machine, which may be equivalent to old
machine or it may also be more efficient than the
old one. by such replacement, the cost, increase in
capacity utilization. Replacement project similar to
modernization project but replacement is taken at
individual machine level.

8. • Expansion project:-
when the current
production level of existing plant could not
meet the growing demand for the product in
the market, and such growth is of permanent
nature, the mgt would decide to increase the
capacity of the plant by installing additional
equipment and facilities there by the total
production is increased. Expansion project is
undertaken to enlarge its plant capacity with a
view to produce a large volume of outputs than
the current level.

9. • Diversification project:-
it is an investment
decision to set up an entirely new project which is not
connected with existing line of business. The strategic
consideration in going for diversification projects to
minimize the risk by having a diversified portfolio of
investments. The diversification will increase the
assets bases, increase in turnover and profits, better
utilization of managerial skills, use of latest
technologies.

10. Classification of
projects

11. 1.National and international projects
2.Industial and non-industrial projects
3.High technology project(for ex. NASA )
4.Low technology project
5. Project based on size
large projects
medium projects
small projects
6.Project based on ownership
public sector projects
privet sector projects
Joint sector projects

12. 7.Projects according to purpose
Balancing projects
Modernization projects
Expansion projects
Diversification projects
Up gradation projects
Maintenance projects
Merger and acquisition

13. Thank you