Long-term decisions about investing in the operations of a company are generally centered around purchases of equipment, machinery, buildings, or other long-term assets. They can range from a purchase of a single piece of equipment to an entire company. They are considered capital purchases because they use the organizations financial capital (e.g., money) to purchase items to support the companys future. The purchases are long-term assets, also known as Property, Plant, and Equipment (PP&E) and usually require a large amount of up-front investment. Often, though, a company will not recoup that investment and earn profit immediately if at all. Therefore, financial analyses must be done to help management decide if the initial capital outlay is worthwhile. Additionally, companies tend to have limited funds to make such investments and must budget accordingly. This unit focuses on the analysis models used by management to make capital budgeting decisions. After, review this unit proceed to respond to the following discussion statement;

Are Capital budgeting decisions risky? For this discussion question:

• Research the risks associated with capital budgeting and identify the three that you believe are the most significant risks.
• Describe these risks and support your assertion with specific reasons.