CHAPTER 12 Capital investment 517Finance
Investment appraisals are undertaken on the assumption that finance will be available if the numbers are
attractive enough. While this may be true some of the time — even most of the time — it is not true all of the
time. Some investments, even though they look good on paper, have trouble attracting venture capital. Look,
for example, at how long it took to build the Adelaide to Darwin railway. The first part of the line (Adelaide
to Alice Springs) was completed about 100 years ago; the Alice Springs–Darwin part was completed only in
- A railway or other major infrastructure project partly completed normally represents funds lost, as it is
often difficult to recover value, even if the project gains enough funding to regain momentum.
Human resources
As with finance, investment appraisals are undertaken on the assumption that human resources (i.e.
employees or consultants with the required skills) will be available on demand. While this may be true for
most needs of the more common skills, it may not be true where highly skilled scientists, pilots, artists, com-
puter analysts and others are needed. In addition, sometimes the undertaking of several projects at a time
by an entity can overload the capacity of the current skilled workforce to produce the required output of the
required quality. An example of this is an engineering entity that needs to produce specialised parts made
from special alloys to very fine tolerances. The tradespeople with the fine quality skills needed may not be
available at the time they are needed. Another example of human resource issues exists in universities. In the
last few years, many university departments have significantly changed their course offerings and in doing so
have had to look closely at their staff to ensure that they have the appropriate staff numbers and experience
to meet the requirements to teach the new courses. In some cases, it has become evident that the university
does not have enough staff with a suitable background to teach in these new areas, which has led to the can-
cellation of some of these new courses or the hiring of additional staff. The Qantas Group provides another
example. It must continually ensure that it has the appropriate manpower to fly its large and varied fleet of
planes. When the new Airbus A380 was introduced, the Qantas Group had to plan ahead to ensure that its
pilots had appropriate training to fly the larger plane. In many cases, the Qantas Group trained existing pilots
of other aircraft to pilot the new configuration of the A380s.
The availability of a skilled workforce can significantly affect the investment decisions made by an entity.