Capital Project - Definition
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What is a Capital Project?
A capital project is a project embarked upon in order to improve, replace, or maintain a capital asset. Capital assets include land, roads, buildings, rails, and others. Common examples of capital projects are new constructions, expansion of a facility, renovation of a building, replacement of heavyweight machines and equipment, among others.
Academic research on Capital Project
- Banks versus venture capital:Project evaluation, screening, and expropriation, Ueda, M. (2004). Banks versus venture capital: Project evaluation, screening, and expropriation.The Journal of Finance,59(2), 601-621. Why do some startup firms raise funds from banks and others from venture capitalists? To address this question, I study a model in which the venture capitalist can evaluate the entrepreneur's project more accurately than the bank but can also threaten to steal it from the entrepreneur. Consistent with evidence regarding venture capital finance, the model implies that the characteristics of a firm financing through venture capitalists are relatively little collateral, high growth, high risk, and high profitability. The model also suggests that tighter protection of intellectual property rights encourages entrepreneurs to finance through venture capitalists.
- Use of quality function deployment in civil engineering capital project planning, Ahmed, S. M., Sang, L. P., & Torbica, . M. (2003). Use of quality function deployment in civil engineering capital project planning.Journal of Construction Engineering and Management,129(4), 358-368. Capital project development is a complex process that takes many years to implement. The development of a capital project usually undergoes several rounds of design evolution, and as a result the basic and original customers requirements may be easily sidetracked or may deviate from the clients objectives. Quality function deployment (QFD) is a tool that can be used to keep track of customers requirements. The objective of this paper is to explore the applicability of QFD in the civil engineering capital project planning process by developing a QFD model with an application template for the process. To verify and demonstrate how the QFD model works, data are obtained from two real-life projects and fed into the template for back-analysis. The findings suggest that QFD can be successfully used in the capital project planning process as a road map to keep track of the original requirements, facilitate good communication across the hierarchy, and serve as a tool for evaluating project alternatives.
- Efficient capital project selection through a yield-based capital budgeting technique, Shull, D. M. (1992). Efficient capital project selection through a yield-based capital budgeting technique.The Engineering Economist,38(1), 1-18. Abstract A yield-based capital budgeting methodology is presented that provides capital project evaluations consistent with shareholder wealth maximization under the assumptions of perlect capital markets and cash flows known with certainty. The methodology is derived by adjusting a modified rate of return technique proposed originally by Lin and more recently in another form by Beaves. Hence, the Lin/Beaves method is examined and an interpretation is suggested for both its investment base and its return measure. Being based upon the Lin/Beaves method, the adjusted methodology shares the economic interpretations associated with both the investment base and the return measure of the Lin/Beaves method. As a result, the adjusted methodology both appropriately evaluates capital projects and provides a return measure with a clear interpretation. Innovation and risk in a public-private partnership: financing and construction of a capital project in Massachusetts, Bloomfield, P., Westerling, D., & Carey, R. (1998). Innovation and risk in a public-private partnership: financing and construction of a capital project in Massachusetts.Public Productivity & Management Review, 460-471. This case study focuses on a Massachusetts project that was financed and built through a complex series of noncompetitive contracting arrangements authorized by special legislation waiving the statutory rules that normally govern publicly funded capital facility projects in Massachusetts. The project's use of lease-purchase financing and fast-track, design/build construction were touted as an innovative, entrepreneurial approach enabling rapid construction of a state-of-the-art capital facility. This case study highlights the project's risks as well as the broader public policy implications of the project's financing and construction techniques.
- Development of performance metrics for phase-basedcapital projectbenchmarking, Yun, S., Choi, J., de Oliveira, D. P., & Mulva, S. P. (2016). Development of performance metrics for phase-based capital project benchmarking.International Journal of Project Management,34(3), 389-402.