Making a Financial Case, Fourth Edition
Whether studying for an ILM qualification or looking to enhance the skills of your employees, this book provides essential solutions, frameworks and techniques to support management and leadership development.
TABLE OF CONTENTS Making a Financial Case, Fourth Edition
3: Capital and Revenue Costs
3 Capital and Revenue Costs
Most projects arising from changes require a certain amount of investment upfront that is, they cost money initially, which we hope will be repaid over time by the project's benefits. When you are putting a financial case together, it is often this initial or capital outlay that will be at issue first.
What the capital cost actually comprises will depend on the project. Here are some common capital costs:
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new buildings, or lease premiums payable on buildings;
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new equipment, such as factory machinery, office or shop fixtures and fittings, computers, laboratory equipment and assembly robots;
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new vehicles, such as aeroplanes, ships, lorries, cars, and forklifts;
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site preparation, installation, initial training and software costs;
Activity 14 
Say you are a first line manager in charge of opening a new shop selling ladies' clothing. What sort of capital costs would the project initially incur?
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You probably thought of a number of items, such as the initial lease premium on the premises, the cost of refitting the shop (counters, fitting rooms, lights, d cor, shopfront, security system), computer and point of sale equipment, and maybe a delivery van.
Clearly, the actual list of capital costs that a project will incur depends wholly on the nature of the project. The point to bear in mind is that they can often be more extensive than initially appears to be the case, and trying to quantify them for presentation in a financial case can be quite...
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