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Financial analysis is an important aspect in the evaluation of capital projects to ascertain whether the investment meets the envisaged returns. Interest rates adopted become imperative since they constitute the cost of funds. The strategy of using a single discount rate in determination of the Net Present Value of projects, with a wide non diversifiable risk does not make sense. Every project is to be appraised based on its risk .Those with a high risk should adopt a high discount rate to reflect the market risk associated. Then the different rates are used to compute the Net Present Value of the project. This is the best way. Then the firm would select the project with the highest NPV (Berezin, 2005).

Where the Internal Rate of Return equals the costs of the project, no further expenses should be made towards the project since no profit would be gained from implementing the project (Cesari, et al., 2010). Other aspects to be considered include the period it takes for the project to be completed and the period it would take for the investor to start earning a profit.

Capital budgeting projects are frequently classified into groups. This is important when analyzing the components, which can easily be varied without causing immense changes to the Net Present Value (Graham, 1951).By classifying them; analysis can be done to determine which aspects are critical to the projects so that minimum changes to it can be done without lowering the NPV for a project. Also can be used to determine the factor, which can be adjusted without having huge negative effects towards the project.

It is vital to conduct audits of previous capital investment projects so that checks are conducted to determine whether the project met the envisaged returns as set by the investor (Hassett, 2008). It also helps[s in future investments by providing comparable information therefore informed decisions would be drawn by investors. Such audits should be conducted annually for easy analysis on the performance of the investments. It also makes it easy for comparisons to be made against other investments.

It is necessary to appreciate sunk costs because they entail costs of the project and therefore they can determine the level of profits earned. They can however be excluded from future capital budgeting analysis because they are past expenses and therefore the funds are no longer available for planning and expenditure. They are already used as expenses and since they cannot be recovered and hence regarded as bad debts, therefore not appropriate to be used for any analysis.

If the FDIC runs out of funds, treasury bills should be sold in order to avail funds (Hamilton, 1922). This is because this is a guarantee fund that is a last resort for cash and can never be allowed to run out of cash. This puts the government further in debts. However, by allowing banks to default on paying back depositors would give rise to depression. Where the government finds itself in such a situation, policies or measures should be put in place that encourage borrowing from banks so that the banks are able to make money and therefore be able to repay the depositors. Such can include lowering lending rates. This would discourage deposits at the same time encourage borrowing. Hence, banks would run at profits.

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