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Running head: PAY OFFS AND RISKS OF CAPITAL INVESTMENTS

Payoffs and Risks of Capital Investments

Student’s Name:
Institution:

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PAY OFFS AND RISKS OF CAPITAL INVESTMENTS 2
Introduction
Capital investments are defined as the funds that are invested by individuals or
organizations for the purposes of furthering their business objectives
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Major capital investments include land, property, buildings, addition to buildings, machinery and
equipment, technology as well as software (Agar, 2005)
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Benefits of Investing in Technology
Technology encompasses a vast concept that has been associated with breakthroughs in
science which allow for better, advanced and automated solutions
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Because the
advent of information technology has spread all over the globe, sharing of information is much
faster
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Technology also eliminates the need for double or
triple entry systems
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This also eliminates the need for hiring or purchasing storage space
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For instance, bookkeeping functions can be handled using
software including QuickBooks and Quicken (Agar, 2005)
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There is a lot of dynamism as new systems are introduced, and the older ones become obsolete
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Change could occur in the in the form of a new technology, for instance, the flash memory or
downloadable programs; or even new operating paradigms, for instance, cloud computing
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Technology is highly competitive
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In addition, particular sectors of technology, such as software and business process
services, have low entry barriers due to relatively low costs of infrastructure
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Declining profit margins usually mean falling share prices for investors
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The risks associated with investing in technology mentioned above are difficult to
mitigate, especially since they are associated with external forces of the market, competition and
change
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For issues
of system failure, the organization should invest in technology provided by reputable firms
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PAY OFFS AND RISKS OF CAPITAL INVESTMENTS 5
References
Mikesell, J
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Fiscal Administration: Analysis and Applications for the Public Sector,
Ninth Edition
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Agar, C
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(2005)
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Butterworth-Heinemann
Lucas, H
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(1999)
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Oxford University Press



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