Capital budgeting is pivotal in making decisions on whether to invest in a market.Furthermore, investment decisions take a lot of time to mature. More importantly, such decisionshave to be made based on the profits that the company is likely to obtain. As such, makinginvestment decisions based on limited information such as expected returns is not suitable for acompany unless its main objective is based on social reasons. The best investments are thosewhich will become profitable in long-run.
Therefore, the available information does not offerenough reasons to persuade Callaway to invest into this market. Noteworthy, the present capitalvalue and future investment makes part of the most important factors in investment decisionmaking. Typically, such decisions would include building new structures and acquiring newequipment.Therefore, it would be best for the management of Callaway to consider using hypothesistesting in making such decisions. Nevertheless, the formula sometimes creates certain errorshence leading to unnecessary decisions. For instance, when using hypothesis testing in this case,the null hypothesis is that the company will make profits only when they are able to control 20%of the market. Therefore, the total number of Callaway’s buyers compared to the buyers in themarket would provide us with Callaway’s share of the market.
As such, 140/624 when convertedSurname 2into percentage equals 22.4%. If this figure is compared to the predicted market share value, it ishigher and hence an error in making investment decision. In conclusion, the management of thecompany ought to consider several other factors such as competition in the market and ease ofoperation including issues like support by the government.
