Capital Project

Published Jan 25, 2023

Definition of Capital Project

A capital project is an investment in a long-term asset or infrastructure that is expected to generate economic returns over a period of time. That means it is an investment (often a significant one) in a physical asset, such as a building, a bridge, or a piece of equipment, that is expected to generate economic returns in the future. This type of project generally requires a lot of time and planning to succeed.

Example

To give an example of a capital project, let’s look at the construction of a new bridge. Assume your federal government decides to build a new bridge to connect two cities. To do so, they need to invest in the construction of the bridge, which includes the purchase of materials, the hiring of workers, and the payment of salaries. This investment is considered a capital project because it is also expected to generate economic returns in the future.

Once the bridge is completed, it will be used by both citizens and businesspeople to travel between the two cities. This will reduce travel time and costs, which will lead to an increase in economic activity in both cities. In addition to that, the government will be able to collect tolls from users of the bridge, which will generate additional revenue. Or in other words, the bridge is expected to generate economic returns in the form of increased economic activity and additional revenue.

Why Capital Projects Matter

Capital projects are important investments for governments and businesses alike. They are often used to improve infrastructure, create jobs, and stimulate economic growth. In addition to that, they can also be used to generate additional revenue for federal and local governments. Thus, capital projects can be a great way to invest in the future of a country or region.