Final answer:
Beyond ROI, evaluating a project involves a mix of cost-benefit analysis, market demand assessment, competitor analysis, resource availability, scrutiny of interest rates, expectations of future profits, and the choice of financial capital sources.
Step-by-step explanation:
When evaluating a project for your company, besides ROI, several other factors should be considered:
- Cost-benefit analysis: It involves weighing marginal costs against marginal benefits, illustrating these factors on a T-shaped chart to directly compare what will be sacrificed with what will be gained.
- Market demand: A key determinant of the expected profitability of an investment, influenced by economic conditions such as energy prices and government incentives.
- Competitor analysis: Assessing the competitive landscape can help anticipate the investment's potential success relative to alternatives available in the market.
- Resource availability: Ensure that the necessary resources, whether financial, human, or material, are available for the project's execution.
- Interest rates: They measure the opportunity cost of using capital and can significantly impact investment decisions, with lower rates stimulating spending and higher rates reducing it.
- Expectations of future profits: A firm's investment levels are often a reflection of its confidence in the future economy, which can lead to new investments when growth is anticipated.
- Financial capital sources: The choices of obtaining capital, whether from investors, reinvesting profits, borrowing, or selling stock, also determine how investments will be financed and repaid.