Capital Investments

CAPITAL INVESTMENTS MONDAY, MARCH 21, 2011 Stocks are not the only investments that a company has. There are also capital investments, which are purchases of long-term operational investments. They differ from stock and bond investments because once a company invests in capital assets, it is committed to the investment for the extended period of time. If the investment turns out to be a bad investment, the company is stuck with the consequences, like it may be unable to seize new opportunities because of the company's capital is committed to the investment. Capital investment decisions are based on an exchange of current cash outflows for the expectation of receiving future cash inflows. Things to take into consideration are the time value of money. Since present value of cash inflows decreases as the time until expected receipt increases, there are several reasons for this: (1) If you wait for money to earn interest, you may lose the opportunity to earn the interest. (2) There is an element of risk due to changing conditions that can result in a failure to collect. (3) There is also inflation that can diminishes the buying power of the dollar, such that the longer you wait to receive the dollar, the less you will be able to buy with it. Several companies have invested in ventures to take their companies into the age of new technology, like Disney, LG Electronics, Samsung, or McMoRan. Disney announced that they have opened new attractions like a new cruise ship, Disney Dream, and new adventure parks like: California Adventure, a new park in Hong Kong, as well as a new resort in Hawaii. They have also taken on Marvel Entertainment and Playdom, a maker of games for Facebook users. LG Electronics has turned its attention to televisions that serve up Web-based Video that can use cable or satellite programming. Hyundai Motors is planning to bring out hybrid cars in order to globally push into the green auto market. Samsung, who has invested in the high-end niche spots for such displays like flat-panel TVs and cellphone markets, dominates the cutting-edge technology with such items like "screens organic light emitting diodes, or OLED, that have a thin layer of organic material that glows, creating the screens backlighting." The company is hoping the investment will pay off by mass producing television sets with the OLED and will yield higher profits than television with LCDs, which currently make up more than 50% of the global TV market. McMoRan Exploration has explored strategy with two extraordinary opportunities: the "deep gas play" that drills to depths of 15,000 to 25,000 ft. (4,572 to 7,620 m.) in the shallow waters of the Gulf of Mexico, and the "ultra-deep gas play" of depths below 25,000 ft. These ultra-deep gas prospects have been correlated to these sections, and has been productive in deep water drilling by other industry participants. Resources Edmonds, Edmonds, McNair, Olds, & Tsay. Survey of Accounting. 2nd Ed. McGraw-Hill Companies. Ethan Smith. (2010, November 8). Boss Talk: Disney CEO Iger Turns Slump Into Springboard for Expansion. Wall Street Journal (Eastern Edition), p. B.1. Retrieved January 5, 2011, from ABI/INFORM Global. (Document ID: 2182689791). Jung-Ah Lee. (2010, November 8). South Korea (A Special Report) --- In the Lead -- and Trying to Stay There --- Samsung is placing its bets on cutting-edge display technology. Wall Street Journal (Eastern Edition), p. R.7. Retrieved January 5, 2011, from ABI/INFORM Global. (Document ID: 2182688291). Ball, E.. (2010, October). Shallow water, deep gas -the McMoRan strategy pays off. Offshore, 70(10), 62,64,66. Retrieved January 5, 2011, from ABI/INFORM Trade & Industry. (Document ID: 2185334601).