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Management must allocate limited resources between competing opportunities projects in a process known as capital budgeting.
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Achieving the goals of corporate finance requires that any corporate investment be financed appropriately. As above, since both hurdle rate and cash flows and hence the riskiness of the firm will be affected, the financing mix can impact the valuation. | ||||||||||||||
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Management must therefore identify the optimal mix of financing—the capital structure that results in maximum value. See Balance sheet, Fisher separation theorem.  |
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These projects must also be financed appropriately. If no such opportunities exist, maximizing shareholder value dictates that management return exces cash to shareholders. |
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Capital investment decisions are long corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria. Corporate management seeks to maximize the value of the firm investing in projects which yield a net present value when valued using an appropriate discount rate. |
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