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Kengatharan, Lingesiya. "Capital Budgeting Theory and Practice: A review and agenda for future research." American Journal of Economics and Business Management 1, no. 1 (February 2, 2018): 20–53. http://dx.doi.org/10.31150/ajebm.v1i1.5.
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The main purpose of this research was to delineate unearth lacunae in the extant capital budgeting theory and practice during the last two decades and ipso facto become springboard for future scholarships. It has analyses of various approaches, such as Web of science search and iCat search were used to locate research papers published during the last twenty years. Four criteria have been applied in selection of research papers: be an empirical study, published in English language, appeared in peer reviewed journal and full text research papers. These papers were collected from multiple databases including OneFile (GALE), SciVerse ScienceDirect (Elsevier), Informa - Taylor & Francis (CrossRef), Wiley (CrossRef), Business (JSTOR), Arts & Sciences (JSTOR), Proquest ,MEDLINE (NLM), and Wiley Online Library. Search parameters covered capital budgeting, capital budgeting decision, capital budgeting theory, capital budgeting practices, capital budgeting methods, capital budgeting models, capital budgeting tools, capital budgeting techniques, capital budgeting process and investment decision. Thematic text analyses have been explored to analyses them.
Keywords: Capital budgeting theory and practices, capital budgeting tools for incorporating risk, discount rate
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Olulu-Briggs, Omiete Victoria. "The Fisher Separation Theorem And Capital Budgeting Decisions Of Quoted Firms In Nigeria." Archives of Business Research 9, no. 2 (February 28, 2021): 231–42. http://dx.doi.org/10.14738/abr.92.9735.
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This study explored the Fisher separation theorem and capital budgeting decisions of quoted firms on the Nigerian stock exchange. A sample of 60 questionnaires were filled and returned by staffs from particular sectors like manufacturing, health and agriculture. Descriptive statistics was employed to illustrate the data while the Spearman rank order correlation test was used to determine if a significant relationship exist among the variables. From the estimates, the Net Present Value and Modified Internal Rate of Return are regularly employed by firms in making capital budgeting decisions. Also, when firms employ capital budgeting tools, it creates wealth for both managers and shareholders, providing support for the Fisher’s separation theorem. Finally, a correlation coefficient of 0.827 reflect a positive and linear relationship between capital budgeting decision and Shareholders’ value creation. Thus, an increase in capital budgeting decisions result to an increase in value creation. This outcome is consistent with findings from other economies and previous studies. It thus recommends that firms in the Nigerian environment should ensure they play down on shareholders’ desire for dividends and instead redirect their funds to more investments by employing suitable capital budgeting decisions.
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Campher, Cedric Abraham, and PJ Vlok. "Building a scenario based active mapping investment tool within a physical asset management framework." South African Journal of Economic and Management Sciences 17, no. 2 (March 6, 2014): 194–206. http://dx.doi.org/10.4102/sajems.v17i2.478.
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This study explores the implementation of an integrated capital budgeting visual mapping framework comprised of both Discounted Cash Flow (DCF) and Real Options Analysis (ROA) techniques. Physical asset investment decisions are based largely on rigid discounted cash flow tools which provide untimely and incomplete decisional criteria. While literature outlines the widespread use of traditional DCF techniques, it nevertheless reveals extensive limitations, including its static inflexibility and slow-to-evolve framework. ROA is a more recent valuation tool based on stock option theory. It brings into account added value found in the flexibility of managerial decision-making and uncertain conditions. This study implements a combined DCF and ROA capital budgeting tool within a Physical Asset Management (PAM) environment. The validity of the framework is realised through an industry-relevant case study presented by a South African mining company.
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Alhabeeb, M. J. "Comparative Analysis of the Traditional Models for Capital Budgeting." International Journal of Marketing Studies 8, no. 6 (November 11, 2016): 16. http://dx.doi.org/10.5539/ijms.v8n6p16.
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<p>Financial decision making for investing firms requires metric tools for comparison and analysis. The managerial choice among many investment alternatives with complex possibilities has made it easier to rely on the now more advanced computer programs of simulation that considers the uncertainty and stochastic changes in the cash flow and risk levels. The major drawback here, especially in the academic world, is the increasing dependency on software and departing from the underlying mathematical reasoning that is most practically fathomed by the manual problem solving. This paper goes back to the tradition on analyzing and comparing the major models of capital budgeting.</p>
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McCartney, Mark W., Elizabeth M. Pierce, and Wayne Mackie. "The Bus Decision: A Case Study Employing Capital Budgeting And Creative Thinking." Journal of Business Case Studies (JBCS) 12, no. 4 (October 3, 2016): 169–76. http://dx.doi.org/10.19030/jbcs.v12i4.9794.
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This paper presents a case whose setting is a regional university situated approximately twenty-five miles away from a community. The community is home to a significant number of the university’s faculty, staff, and students. The university is asked to provide a commuter bus to transport people to and from the community. The university, in turn, approaches the community municipal bus service asking if it (the municipal bus service) could provide the requested route. The case incorporates cash flow management decision making including: (1) identifying necessary information for the analysis, (2) identifying appropriate analytical tools for the analysis, and (3) performing the analysis. This case is appropriate for first year graduate students, as well as upper level undergraduate business students. The case is designed to be taught in one class hour and is expected to require two hours of outside preparation by the students.
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Hanesti, Elsi Mersilia. "BAGAIMANA KEUANGAN ISLAM MENGGUNAKAN FAKTOR DISKONTO DALAM CAPITAL BUDGETING DECISION?" El Dinar 6, no. 2 (November 1, 2018): 83. http://dx.doi.org/10.18860/ed.v6i1.5748.
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<em>In the conventional financial management, the method of calculating the</em><em> capital budgeting decision using NPV and IRR, which both use the interest rate as one of its component count (as a discount factor). Then, how Islamic financial management sees this? With the research methods of literature study, this paper is about the financial outlook of Islam the methods of NPV and IRR as well as finding out what the proper method for capital budgeting decision. Results of the study were that in the process capital budgeting decision, the use of NPV and IRR methods are allowed (according Obaidullah, Prof. Shabir F.Ulgener, and Zarqa). The interest rate in the calculation only as a means of simplification and ease in the calculation. The use of a list of compound interest rate (compounded interest) is a tool to calculate the expected rate today and the future. It can be said that the Islamic finance uses a list of compound interest rate as a tool for simplify the calculation, just as a comparison level of opportunity cost in alternative investments. The level of interest in the calculation of these can be replaced with a comparator, such as: the return on the sukuk, the profit sharing ratio, and the return on investment or other real instruments in Islam.</em>
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Correia, C. "Capital budgeting practices in South Africa: A review." South African Journal of Business Management 43, no. 2 (June 29, 2012): 11–29. http://dx.doi.org/10.4102/sajbm.v43i2.180.
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This paper reviews the capital budgeting survey literature in South Africa over the period 1972 to 2008. The survey evidence indicates a significant growth in Discounted Cash Flow (DCF) methods and a fall in the use of other methods. In particular, there has been growth in the use of Net Present Value (NPV). Yet, the Internal Rate of Return (IRR) technique remains the primary method used in practice despite some serious drawbacks. Larger companies are more likely to use DCF methods. There has been a significant growth in the use of sensitivity analysis and scenario analysis. However, there is little use of sophisticated risk analysis tools such as Monte Carlo simulation, and decision trees. Although financial theory predicates the use of risk adjusted discount rates, surveys indicate that the majority of companies use a single firm discount rate. Companies have increasingly used inflation-adjusted cash flows but the process of ranking mutually exclusive projects is not aligned with finance theory. There is limited use of the Modified Internal Rate of Return (MIRR) method and DCF dominant companies do not outperform non-DCF dominant companies. The most important phase of project evaluation is the project definition and cash flow estimation phase and yet research studies have focused mainly on the financial analysis and project selection phase.
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Michelon, Paula de Souza, Rogério João Lunkes, and Antonio Cezar Bornia. "Use of capital budgeting practices: an integrative review." Enfoque: Reflexão Contábil 40, no. 3 (September 16, 2021): 139–57. http://dx.doi.org/10.4025/enfoque.v40i3.48838.
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This article aimed to highlight the relationships between these characteristics and the use ofcapital budgeting practices. For the selection of articles published on “capital budgeting” it wasused the Proknow-C tool. It was found that the theory-practice gap is both related with the organizationaland managerial characteristics from the practical point of view, but requires a reviewby academicians. Organizations should seek professionals with experience in capital projectsappraisal and who are familiar with and knowledgeable in the use of adequate practices for decision-making. This research contributes by indicating the research gaps that need to be explored by researchers and by trying to identify the difficulties found by managers that interfere in the capital budgeting results.
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Teker, Suat. "Revisiting discounted cash flows model as a capital budgeting decision tool." Pressacademia 12, no. 1 (December 31, 2020): 60–63. http://dx.doi.org/10.17261/pressacademia.2020.1349.
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Shaban, Osama Samih, Ziad Al-Zubi, and Ahmad Adel Abdallah. "The Extent of Using Capital Budgeting Techniques in Evaluating Manager’s Investments Projects Decisions (A Case Study on Jordanian Industrial Companies)." International Journal of Economics and Finance 9, no. 12 (November 13, 2017): 175. http://dx.doi.org/10.5539/ijef.v9n12p175.
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The aim of this research paper is to study the extent of using capital budgeting techniques on choosing the suitable project for investment. The current research study focused on capital budgeting techniques such as Net Present Value NPV, and Internal Rate of Return IRR, and Pay Back period PB, which is considered the main tools in the hands of decision makers in deciding the best possible alternative of investment. In order to achieve the purposes of the study a questionnaire have been created (based on Graham and Harvey survey in 2001), the aim was to cover most of the Jordanian industrial companies despite of their size and ownership in the current year 2017. Resolution data were analyzed using the statistical program SSPS. Finally, the study concluded that, 58% of Jordanian industrial companies use the Net Present Value, 22% use the Payback Period, 12% use the Internal Rate of Return, and the remaining used a combination of the Accounting Rate of Return, Profitability Index, and sensitivity analysis. The current research study is expected to assess management in choosing the best capital budgeting technique in the evaluation of its future investment projects.
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Wardhana, Wishnu. "Aplikasi Capital Budgeting dalam Penentuan Keputusan Investasi Kamar dan Ballroom Di Hotel Panorama Lembang." Jurnal Kepariwisataan: Destinasi, Hospitalitas dan Perjalanan 2, no. 1 (June 25, 2018): 10–20. http://dx.doi.org/10.34013/jk.v2i1.17.
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This research's title is "Applications of Capital Budgeting Method in Feasibility Study of Rooms and Ballroom Investment at Hotel Panorama Lembang", the purpose of this research are to know the feasibility of hotel investment based on financial projection aspect which using Capital Budgeting Method at Hotel Panorama Lembang. The feasibility of investment evaluate by the tools of capital budgeting model, which is have aspect of Discounted Payback Period, Net Present Value, Internal Rate Of Return, and Profitability Index in Hotel Panorama Lembang. The results of this research from the financial projection evaluated with the tools of capital budgeting evaluation which have the results can be seen that investment is feasible, as calculated by the method of discounted payback period is 8 years and 2 months based on hotel evaluation and 6 years and 11 months based on writer's evaluation, net present value in positive result (NPV > 0) in the amount of Rp. 1.743.693.325 , Internal Rate of Return is higher than the discounted factor of 12% in the amount of 23.9303%, profitability index is in positive result higher than 1. Based upon this calculation summarised that the feasibilty of investment based on financial projection are accepted. Based on the evaluation from the capital budgeting method, the criteria of investment at Hotel Panorama Lembang are accepted. The management used the methods which doesn't improve a good result in feasibility. Methods that used by the author more improve a good result in investing decisions, because using a selection of forecasting methods for future revenues. The author used a time series forecasting methods to improve more revenues for hotel. This forecasting method can provide the closest forecast result and the highest rate of accuracy. The author recommends to the management of Panorama Hotel Lembang to continue and accepted the investment of new rooms and ballroom. Considering the result of a feasebility study with a capital budgeting methods are accepted. The author also recommends to the management of Panorama Hotel Lembang to use a proper forecasting methods, such as time series methods.
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Anand, Manoj. "Corporate Finance Practices in India: A Survey." Vikalpa: The Journal for Decision Makers 27, no. 4 (October 2002): 29–56. http://dx.doi.org/10.1177/0256090920020404.
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The present study surveys 81 CFOs of India to find out about their corporate finance practices vis-a-vis capital budgeting decisions, cost of capital, capital structure, and dividend policy decisions. It analyses the responses by the firm characteristics like firm size, profitability, leverage, P/E ratio, CFO's education, and the sector. The analysis reveals that practitioners do use the basic corporate finance tools that the professional institutes and business schools have taught for years to a great extent. The study also reveals that the corporate finance practices vary with firm size.
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Abbati de Assis, Camilla, Antonio Suarez, Jeffrey P. Prestemon, Jeffrey Stonebraker, Carlos Carrillo, Sudipta Dasmohapatra, Hasan Jameel, and Ronalds Gonzalez. "Risk analysis, practice, and considerations in capital budgeting: Evidence from the field for the bio-based industry." BioResources 16, no. 1 (November 4, 2020): 19–45. http://dx.doi.org/10.15376/biores.16.1.19-45.
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This study aims to examine how organizations in the bio-based industry perceive risks and perform risk analysis within the capital investment decision-making process. More specifically, this study aims to assess sources of uncertainty commonly considered, identify tools and methods used for risk assessment, and understand how risk analysis is considered in capital budgeting. Eighty-six respondents were electronically surveyed on practices for capital investment risk analysis, including C-suite and upper management from different organization sizes and segments in the bio-based industry. It was found that some forms of risk analysis are utilized either in project assessment and/or for decision making by most respondents; however, qualitative and deterministic assessment practices dominate over probabilistic methods. In addition, risk assessment is most commonly performed in the later stages of a project, with less than 50% of adoption at the earlier stages. Overall, the main sources of uncertainties considered when performing risk assessment are financial, market and sales, and technology, with competition being considered mostly by upper management levels. Additionally, consistent with previous studies in other industry sectors, Internal Rate of Return, Return on Investment, and Net Present Value are the preferred financial indicators used to evaluate capital investments.
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Rincon, Jorge L., Sarel Lavy, and Jose L. Fernandez-Solis. "A Strategic Approach to Target Capital Investment on Facility Assets: Literature Review." Journal of Facility Management Education and Research 1, no. 1 (January 1, 2017): 30–39. http://dx.doi.org/10.22361/jfmer/76316.
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ABSTRACT Analysis of a strategic planning framework, proposed by Edward Zielinski, focused on reducing operational costs in Facility Management (FM) through using long-term best practices in capital investment. This paper indicates how that framework may assist in the FM decision process of capital investment allocation. The framework structure is integrated through: (1) alignment of FM decisions to the organizational strategy; (2) measuring FM performance with a data-driven approach; and (3) standardization of budgeting processes as support for FM credibility. The authors use a Structured Literature Review to investigate how previous research of the topic and subtopics supports the framework's objectives. Emphasis on referenced case studies aims to investigate the applicability of this framework by FM practitioners. The framework is fully applicable to FM operations. The case study analysis suggests it is a powerful tool for supporting capital investment decisions in organizations. Benefits foreseen include: value creation through alignment of FM decisions to organizational goals, risk control in short-, mid- and long-term FM decisions, creation of structured procedures for FM data acquisition supporting stakeholders' decisions, increased FM credibility through budgeting process standardization, improvement of FM operations efficiency, and senior management awareness of FM priorities. This paper encourages FM practitioners to structure their daily operations by addressing the three most challenging aspects of this profession: understand the client, capitalize valuable knowledge, and secure funding.
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Ліхоносова, Г. С., and О. І. Нецвітаєва. "МЕХАНІЗМИ БЮДЖЕТУВАННЯ ДІЯЛЬНОСТІ ПІДПРИЄМСТВА : МОЖЛИВОСТІ УПРАВЛІННЯ ФІНАНСОВОЮ БЕЗПЕКОЮ." TIME DESCRIPTION OF ECONOMIC REFORMS, no. 3 (October 18, 2019): 24–30. http://dx.doi.org/10.32620/cher.2019.3.03.
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Formulation of the problem. The article presents the author's opinion on the possibilities of using the mechanisms of budgeting the activity of the enterprise as tools of financial security management. The liberalization of financial relations and the free cross-border movement of capital led to the intensification of internal and external shocks on the development of economic entities. The purpose of the article is to study the theoretical aspects of the budgeting system as a tool for managing the financial security of an enterprise, in order to form a holistic view of budgeting as an economic category. The object of the study is the process of budgeting the activity of the enterprise, its organizational and economic capabilities and tools for managing the financial security of the enterprise. Methods used of the research: systematic approach, method of generalization, comparison, logical-meaningful method, monographic method, methods of induction and deduction, etc. The main hypothesis is that the financial stability of a functioning enterprise depends on the economic policy option, which is formed by the structure of the budgeting instruments of the enterprise. Presenting main material. The reasons for using this tool at the enterprise are revealed. The efficiency of the use of budgeting in the management of financial security of the enterprise is shown. Budgeting makes it possible to increase the financial soundness of management decisions and the effectiveness of information support of enterprise management; to differentiate between the leaders of different levels of the organizational hierarchy for results and to make a positive impact on their motivation; to agree on the different lines of activity of the units and the work of the enterprise as a whole on the basis of a single coordinated budget; improve current budgets by matching planned and actual indicators with results; to predict volumes of material and financial flows, cost structure. The originality and practical significance of the research. The basis of the mechanism of ensuring the financial security of the enterprise is a systematic combination of certain tools, methods, levers and information and analytical support, created on the basis of the principles of financial security, which objectively exist as economic laws, as well as produced by entities of financial security management of the enterprise to achieve and protecting the latter's financial interests. Conclusions of the research. The introduction of the entity's budgeting system enables the planning of financial and economic activities with the expectation of achieving a specific financial result and financial targets. Thus, budgeting is an effective tool for managing the financial security of an enterprise and acts as one of the main processes in the financial planning system.
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Kashkimbayev, S. B., and A. N. Zhakupov. "Effective budgeting as a priority of the company›s development." Economics: the strategy and practice 16, no. 2 (July 12, 2021): 46–53. http://dx.doi.org/10.51176/1997-9967-2021-2-46-53.
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In the modern world, in the conditions of economic instability and fierce competition, companies need to have effective tools that can provide an opportunity to study the current financial condition, compare cash inflows and outflows, approve the right decisions that contribute to the subsequent formation and development of the enterprise, as well as optimize management costs. In a company, such an important tool for financial planning, as well as control, is budgeting.This article discusses the tasks, goals, methods, disadvantages and advantages of budgeting, illustrates the full continuous cycle of budget management and the stages of development of the concept of budgeting. In addition to the theoretical aspects, the article considers the empirical and methodological aspects. The purpose of this article is to generalize the theoretical provisions and develop the organizational and methodological aspects of the application of budgeting and the impact of effective budgeting on the development of the overall company. The article uses complex and systematic approaches to the processes and phenomena under study, which is achieved through the methods of analysis and synthesis, review and collection of information, statistical analysis, scientific abstraction and visualization.In the conclusion of the article, the conclusions are made, that a properly formed concept of budgeting, improvement of methods and elements of the budget process will make it possible to manage the capital, as well as a single commercial, and the company as a whole, establishing the sequence of business types, terms and trends of restructuring. This will allow the owners of companies to adapt their business in time to all possible changes in market conditions.
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Lynn R. Legaspi, Joy. "Does Management Accounting Information Meet the Needs of SMEs? An Investigation of Its Usefulness from Manufacturing Enterprises." International Journal of Engineering & Technology 7, no. 4.1 (September 12, 2018): 57. http://dx.doi.org/10.14419/ijet.v7i4.1.28225.
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The use of appropriate management accounting techniques for the problem at hand are useful to managers. This study describes the level of usefulness of management accounting tools (MATs) used, test the relationship of MATs used to net income and capital, test of difference between the level of its usefulness and the difficulties encountered in applying the tools. Questionnaire survey was used to obtain information from manufacturing sector. Frequency, median, Spearman Rho and Mann-Whitney U were utilized to analyze the data. The study suggest that medium firms utilized more tools than small enterprises. Statement of cash flow analysis, capital budgeting decisions and financial budgets were considered as the very useful tools used. Likewise, the study developed significant relationship between selected variables of size, level of net income and level of capital to the level of its usefulness for medium-sized enterprises and sufficient to create significant difference between the levels of its usefulness. Lack of qualified employees and its use are not deem necessary as to the nature of the enterprise operations ranked as the top barriers encountered in applying the tools. Therefore, the appropriateness of management accounting information depends upon the operating activities, strategies and the size of the organization.
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Jenkins, Glenn P., and Armin Zeinali. "Cost-effective infrastructure choices in education: Location, build or repair." South African Journal of Economic and Management Sciences 18, no. 1 (March 4, 2015): 70–83. http://dx.doi.org/10.4102/sajems.v18i1.818.
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The purpose of this study is to develop a model to arrive at a joint optimising strategy for capital budgeting for the construction of new school buildings and for the renovation of existing schools. This model provides a practical tool for ranking construction projects so as to yield the maximum positive impact on the education system. A key aspect of the model is that it provides the optimal mix of renovation and new construction that should be undertaken under a fixed budget constraint.The model is applied to a sample dataset from the education sector of Limpopo province, South Africa, in order to quantify the benefits of using the model. The benefits from using this model for decision making on the evaluation of new and renovation investments in school infrastructure is estimated to increase the effectiveness of these investments by up to 300 percent over the counterfactual system for making these decisions.
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Boukhris, Imen, Raouia Ayachi, Zied Elouedi, Sehl Mellouli, and Nahla Ben Amor. "Decision Model for Policy Makers in the Context of Citizens Engagement." Social Science Computer Review 34, no. 6 (August 3, 2016): 740–56. http://dx.doi.org/10.1177/0894439315618882.
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Citizens’ engagement is considered as one of the important dimensions for the development of smart cities since, in the vision of a city of the future (smart city), citizens will be more and more involved in the decision-making process of different issues related to the development of a city. In this context, policy makers face a decision problem where they have to integrate a new dimension, which is the voice of the citizens’ decision. This article proposes a tool based on multicriteria decision making methods to provide decision makers with the best alternative(s) that are based on citizens’ opinions. In order to tackle the potential interdependencies between criteria and also between alternatives in the selection process, we apply a hybrid model integrating the analytical network process and an extended version of technique for order performance by similarity to ideal solution to support group decision-making. The proposed model is applied in the context of participatory budgeting (PB) where citizens decide on the projects in which the money can be invested. This process is complex since it encompasses multiple interdependent criteria that may be conflicting with each other and that are used to take decisions. To illustrate our approach, we will apply the proposed technique for the case study of La Marsa, a city in the north of the capital Tunis (Tunisia) that adopted, since 2014, a PB strategy in which citizens proposed alternatives on how an amount of money can be used to lighten specific streets in the city.
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Mahmood, Asif. "Gazing Lean through the lens of System of Systems Dynamics: A case of weaving mill." Journal of Engineered Fibers and Fabrics 14 (January 2019): 155892501987070. http://dx.doi.org/10.1177/1558925019870705.
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In this research article, System of Systems Methodologies framework has been extended in order to propose that System Dynamics approach has the capability to model and simulate the aspects of System of Systems. It, therefore, invokes a new concept of System of Systems Dynamics in the literature. Then, in order to perceive the practical implications, a case study account of a textile weaving organization has also been demonstrated. The organization under consideration had high cycle time due to unnecessary work in process, and reduced production capacity because of rolling blackouts. The study was conducted to model and modify the existing scenario intended to put forward a preferred future scenario. The proposed future state was constructed using selected Lean tools required to address the ongoing concerns. In order to realize the prospective Lean scenario, a capital investment model was run in relation with the setup developed to carry out capital budgeting for multi-fuel captive power plants. System of Systems Dynamics in the presence of lean concepts proved to be an intuitive and comprehensive approach for making strategic decisions. The model can serve as a planning tool to evaluate the financial impact on the overall profitability of the company under consideration.
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Adams, F., R. Aidoo, J. O. Mensah, A. Mensah, K. Amankwah, B. K. Kyei, J. E. Gbadago, et al. "Commercialisation of African palm weevil larvae for employment creation and nutritional security in rural Ghana: a financial feasibility approach." Journal of Insects as Food and Feed 7, no. 6 (September 11, 2021): 1051–60. http://dx.doi.org/10.3920/jiff2020.0153.
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Edible insects are increasingly recognised as a source of nutritional security, poverty reduction and overall household wellbeing, particularly in rural sub-Saharan Africa. In Ghana, for instance, edible insects such as the African palm weevil larvae are integral part of traditional dishes, which are widely consumed among different strata of the Ghanaian society. Following the limited supply of these larvae from the traditional source, deliberate efforts at domestication are being promoted as an investment option in Ghana. This paper uses the case study approach based on data from a modern weevil larvae (akokono) micro-farm in the Ashanti region to analyse the financial viability of an insect-based business to guide future investment decisions. Standard capital budgeting tools such as net present value (NPV), benefit-cost ratio (BCR), internal rate of return (IRR) and payback period were employed to assess the financial viability of an akokono micro-farm of 5.47×7.62 m dimension. The results show that a capital expenditure of Gh₵ 5,333.17 (US$ 935.61) is required to establish the akokono micro-farm. With a five-year project life and cost of capital of 33.5%, the investment appraisal generates a positive NPV (Gh₵ 6,065.89 = US$ 1,164.3), BCR that is greater than unity (1.34), and an IRR (37%) which is above the current lending rate on the financial market in Ghana. The paper concludes that domestication of palm weevil larvae is financially viable at the micro-scale even in the face of pessimistic assumptions. These findings have practical implications for small-scale enterprise development in addressing problems of malnutrition and unemployment among vulnerable groups like women and youth in the rural economy of Ghana.
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Osueke, C. O., B. O. Akinnuli, and O. O. Ojo. "Modeling Equipment Procurement Strategic Decisions Competing for Limited Available Budget under Redundant Accessory Cost." Engineering Management Research 4, no. 2 (October 19, 2015): 80. http://dx.doi.org/10.5539/emr.v4n2p80.
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<p>The challenges that used to come up as a result of project failure have to do with improper planning. This is looking into future what can occur based on present event. In financing equipment or machinery, the capital in hand is a critical factor that determines equipment procurement strategies. There is need for an optimum model to control the available budget to be put in place in order to optimally allot the available budget to the machines, spare parts and miscellaneous costs under the redundant of accessory cost. This study identified the financial strategic decisions for machines, spare parts and miscellaneous costs, developed mathematical models for the identified strategic decisions, test and evaluate the performance of the developed models. In this study, three strategic decisions were considered (i.e., machines, spare parts and miscellaneous costs) and the optimum model to control the budget for machines, spare parts and miscellaneous costs are dealt with under the redundant accessory cost. This is because an existing manufacturing company or industry has high inventory of accessories which always aid the performance of machine in the industry. Therefore, it is necessary to optimally allot the available budget on the machine(s) to be procured, spare part to be stocked and miscellaneous cost. The amount allotted to machines, spare parts and miscellaneous while budgeting for year 2015 are in this ratio: Machines, ($5,263.83); Spare parts, ($27,723.09); Miscellaneous, ($4,366.03), this based on available small budget of N 6,350.000 of dollar value of US$1,079,500.00. This model is a strong decision tool for allocating available budget in the period of financial scarcity where equipment procurement for production needs must be carried out. This model is highly recommended to any manufacturing company, small, medium and large scale that equipment procurement affects their production in developed and developing countries.</p>
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Magni, Carlo Alberto. "CAPM‐based capital budgeting and nonadditivity." Journal of Property Investment & Finance 26, no. 5 (August 8, 2008): 388–98. http://dx.doi.org/10.1108/14635780810900251.
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PurposeIn investment decision making, the net present value (NPV) rule is often used alongside the well‐known capital asset pricing model (CAPM). In particular, the use of disequilibrium NPV is endorsed in corporate finance for both valuation and decision. The purpose of this paper is to test the reliability of this approach to capital budgeting valuations and decisions.Design/methodology/approachThe use of disequilibrium values for computing a project's NPV is considered, and the consistency with the CAPM is checked. The resulting valuation and decision are contrasted with the no‐arbitrage principle, which is universally considered a benchmark for rationality.FindingsThe paper finds that the disequilibrium NPV is logically deducted from the CAPM for decision‐making purposes. However, this NPV provides nonadditive values, which makes it inconsistent with the no‐arbitrage principle.Practical implicationsThe use of the CAPM+NPV procedure for valuing projects is invalid if disequilibrium values are used. Its use for decision making is logically valid but practically unsafe, because decision makers may frame equivalent courses of action in different ways, resulting in different decisions, which implies that they may incur arbitrage losses.Originality/valueThe literature does not distinguish between equilibrium and disequilibrium NPV nor between valuation and decision. This paper explicitly makes this distinction and the resulting consequences are highlighted.
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Seiler, Michael J. "ADVERSE SELECTION IN CAPITAL BUDGETING DECISION MAKING." Management Research News 19, no. 8 (August 1996): 61–67. http://dx.doi.org/10.1108/eb028488.
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Northcott, Deryl. "Rationality and decision making in capital budgeting." British Accounting Review 23, no. 3 (September 1991): 219–33. http://dx.doi.org/10.1016/0890-8389(91)90083-e.
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Umma, Ianna, and R. Sri Handayani. "The Effect of Attribute Framing and Justification on Capital Budgeting Decisions." JEMA: Jurnal Ilmiah Bidang Akuntansi dan Manajemen 16, no. 2 (May 30, 2019): 117. http://dx.doi.org/10.31106/jema.v16i2.2710.
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This study aims to analyze the effect of the attribute framing and justification on decision making through the capital budgeting process. This study also aims to examine the effect of justification as moderation on the effect of attribute framing on capital budgeting decisions. The capital budgeting decision in this study is a decision toward the proposed capital budgeting project in the form of approving or rejecting the proposed project. This study uses a quasi-experimental research design with the data taken is primary data. The quasi-experimental research was designed 2 x 2 between subjects which was conducted to 83 financial students in the Magister of Management, Diponegoro University. Data analysis techniques used in this study were one-way ANOVA and two-way ANOVA.The results of the study shows that attribute framing and justification can influence decision making through the capital budgeting process. In particular, the information that is positively presented has an impact in the higher approval of a proposed capital budgeting project. This research also concluded that justification could not reduce the effect of the attribute framing on capital budgeting decisions. This shows that belief revision theory- foundation approach cannot explain the phenomenon of this study.
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Ho, Simon, and Richard Pike. "Computer Decision Support for Capital Budgeting: Some Empirical Findings of Practice." Journal of Information Technology 11, no. 2 (June 1996): 119–28. http://dx.doi.org/10.1177/026839629601100203.
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While recent surveys suggest that capital budgeting systems in business organizations continue to become more formalized and sophisticated, a constraint on the use of sophisticated capital budgeting techniques seems to be the degree of support provided by firms’ capital budgeting information systems (CABIS). This paper, based on a survey of 146 large firms, outlines the current status of CABIS and their usage pattern. It was found that although two-thirds of sample firms have specific computer application systems for capital budgeting, most CABIS are relatively unsophisticated and less than adequate in providing the information and decision support capabilities required to use sophisticated capital budgeting techniques effectively. In particular, the barrier and problems encountered in the use of probabilistic risk analysis were explored. Implications of these findings are discussed.
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Morales Burgos, Jaime A., Markus Kittler, and Michael Walsh. "Bounded rationality, capital budgeting decisions and small business." Qualitative Research in Accounting & Management 17, no. 2 (February 3, 2020): 293–318. http://dx.doi.org/10.1108/qram-01-2019-0020.
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Purpose The purpose of this paper is to provide insight into the capital budgeting decision-making of Canadian and Mexican entrepreneurs in small businesses in the food sector. The objective is to understand the capital budgeting decisions through the lens of bounded rationality and how these decisions are affected by different (national) contexts. Design/methodology/approach This is a comparative study in which the use of constructivist grounded theory allowed deep conversations about capital budgeting decisions. Data was collected from forty semi-structured interviews with entrepreneurs/managers in two regions, Mexico and Canada. Findings Insights from this study suggest that entrepreneurs’ capital budgeting decisions are not only taken under conditions of bounded rationality but also suggest a prominent role of context in how bounded rationality is applied differently towards investment decisions. Research limitations/implications While the findings cannot simply be generalized, exploring how capital budgeting decisions are made differently across two regional contexts adds to the understanding of the nexus of context, bounded rationality and capital budgeting decision-making. Practical implications Using a bounded rationality lens, this study contrasts and explains similarities and differences in the entrepreneur’s capital budgeting decision-making within small businesses. The insights add to the body of knowledge and help entrepreneurs to reflect on their approach to decision-making. Originality/value The paper uses a less commonly applied approach to understand two under-researched regional contexts. We use constructivist grounded theory to explore entrepreneurs’ capital budgeting decision-making in small businesses in two regions, Canada and Mexico. The comparative approach and the findings add to the understanding of decision-making, highlight the prominent role of context and also challenge some insights from previous research.
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Hall, John H. "An analysis of capital budgeting methods, the cost of capital and decision-makers in listed South African firms." Corporate Ownership and Control 9, no. 2 (2012): 519–29. http://dx.doi.org/10.22495/cocv9i2c5art7.
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This study’s purpose was to link the length of decision-makers’ employment in a firm and their academic qualifications to their choice of capital budgeting methods and of cost of capital techniques. The results show that the net present value (NPV) is more popular than the internal rate of return (IRR) as a capital budgeting technique. Also, irrespective of how long respondents have been employed by a company, they all use a discount rate. However, there is a significant tendency among respondents with postgraduate qualifications to prefer the NPV as a capital budgeting technique. Thus, in South Africa, academic qualifications do play a role in decision-makers’ capital budgeting practices.
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Mubashar, Afeera, and Yasir Bin Tariq. "Capital budgeting decision-making practices: evidence from Pakistan." Journal of Advances in Management Research 16, no. 2 (April 23, 2019): 142–67. http://dx.doi.org/10.1108/jamr-07-2018-0055.
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Purpose The purpose of this paper is to examine the current trends of capital budgeting practices (analysis techniques, discount rate estimations and risk assessment methods) among Pakistani listed firms and analyze the responses conditional on firms’ demographics and executive characteristics. Design/methodology/approach An online questionnaire was sent via e-mail to top 200 non-financial firms (in terms of market capitalization) listed on Pakistan Stock Exchange. Findings With a response rate of 35 percent, it is concluded that the theory–practice gap is low as Pakistani listed firms are using discounted cash flow methods of capital budgeting and preferring net present value over internal rate of return. Similarly, weighted average cost of capital is estimated using target value weights, and capital asset pricing model (with extra risk factors) is used to determine the cost of equity capital. For risk assessment, sensitivity analysis and scenario analysis are the dominant approaches; however despite the theoretical superiority, the use of real options is very low. Overall, investment decision responses significantly differ across firm’s demographics and executive characteristics. Practical implications Pakistani business schools need to address the low usage of advanced methods such as modified internal rate of return and real options among Pakistani listed firms. Originality/value This is the first comprehensive study on the topic in Pakistan and have highlighted the areas of capital budgeting where Pakistani firms’ practices deviates from finance theory.
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Bennouna, Karim, Geoffrey G. Meredith, and Teresa Marchant. "Improved capital budgeting decision making: evidence from Canada." Management Decision 48, no. 2 (March 9, 2010): 225–47. http://dx.doi.org/10.1108/00251741011022590.
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PurposeThe purpose of this article is to evaluate current techniques in capital budget decision making in Canada, including real options, and to integrate the results with similar previous studies.Design/methodology/approachA mail survey was conducted, which included 88 large firms in Canada.FindingsTrends towards sophisticated techniques have continued; however, even in large firms, 17 percent did not use discounted cash flow (DCF). Of those which did, the majority favoured net present value (NPV) and internal rate of return (IRR). Overall between one in ten to one in three were not correctly applying certain aspects of DCF. Only 8 percent used real options.Research limitations/implicationsOne limitation is that the survey does not indicate why managers continue using less advanced capital budgeting decision techniques. A second is that choice of population may bias results to large firms in Canada.Practical implicationsThe main area for management focus is real options. Other areas for improvement are administrative procedures, using the weighted average cost of capital (WACC), adjusting the WACC for different projects or divisions, employing target or market values for weights, and not including interest expenses in project cash flows. A small proportion of managers also need to start using DCF.Originality/valueThe evaluation shows there still remains a theory‐practice gap in the detailed elements of DCF capital budgeting decision techniques, and in real options. Further, it is valuable to take stock of a concept that has been developed over a number of years. What this paper offers is a fine‐grained analysis of investment decision making, a synthesis and integration of several studies on DCF where new comparisons are made, advice to managers and thus opportunities to improve investment decision making.
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van der Enden, C. "Improving capital budgeting: A decision support system approach." European Journal of Operational Research 19, no. 1 (January 1985): 144–45. http://dx.doi.org/10.1016/0377-2217(85)90322-4.
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Frost, Geoffrey, and James Rooney. "Considerations of sustainability in capital budgeting decision-making." Journal of Cleaner Production 312 (August 2021): 127650. http://dx.doi.org/10.1016/j.jclepro.2021.127650.
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Miller, Edward. "Decision-making under uncertainty for capital budgeting and hiring." Managerial and Decision Economics 6, no. 1 (March 1985): 11–18. http://dx.doi.org/10.1002/mde.4090060104.
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Ghosh, Suvankar, Marvin D. Troutt, Jay Weinroth, and Xiaolin Li. "An adoption decision model of emerging capital budgeting methodologies." International Journal of Operational Research 5, no. 3 (2009): 349. http://dx.doi.org/10.1504/ijor.2009.025201.
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Moribayashi, Masaaki, and Chao-Yen Wu. "A decision support system for capital budgeting and allocation." Computers & Industrial Engineering 19, no. 1-4 (January 1990): 524–28. http://dx.doi.org/10.1016/0360-8352(90)90173-j.
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Jarrett, Jeffrey E. "Analysts’ Forecasts, the Abandonment Option and Intellectual Capital." International Journal of Accounting and Financial Reporting 8, no. 4 (October 11, 2018): 370. http://dx.doi.org/10.5296/ijafr.v8i4.13825.
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The abandonment option under various capital budgeting models are discussed in this manuscript to bring forth the notion that present value of cash flows is often improperly estimated in the financial models utilized in the decision analytic process. In this study, Intellectual Property Rights and other intangible assets often are not considered in accounting estimation processes utilized in financial accounting. A decision maker often utilizes misestimates of the present value of cash flow resulting in less than optimum capital budgeting decisions. Decisions to abandon for salvage and other similar decisions improve when the present value of intangibles and property rights are included in the decision process. This last statement is the goal of this study and to present well founded processes to improve abandonment and similar decisions in capital budgeting decisions. The estimation problem in financial accounting is included in the analysis to accomplish this goal.
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Gitman, Lawrence J., and Charles E. Maxwell. "A Longitudinal Comparison Of Capital Budgeting Techniques Used By Major U.S. Firms: 1986 Versus 1976." Journal of Applied Business Research (JABR) 3, no. 3 (October 31, 2011): 41. http://dx.doi.org/10.19030/jabr.v3i3.6514.
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Capital budgeting is one of the most important areas of financial decision-making. This research article reports the results of a survey of capital budgeting techniques and compares them with techniques reported in earlier studies. The research seeks to determine what changes may have occurred over the past 10 years and how well current teaching compares with current practice. The findings of the study indicates changes have occurred in three major areas, (1) preferences with respect to capital budgeting techniques, (2) basic types of firms in the economy, and (3) perceived levels of sophistication in capital budgeting over the past ten years. The results of the study suggest opportunities exist for further improving the capital budgeting process.
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Benallou, Oualid, and Rajae Aboulaich. "Improving Capital Budgeting Through Probabilistic Approaches." Review of Pacific Basin Financial Markets and Policies 20, no. 03 (August 14, 2017): 1750018. http://dx.doi.org/10.1142/s0219091517500187.
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This article advocates the multiple benefits of applying probabilistic approaches to capital budgeting through enriching the deterministic framework with a stochastic modeling of main impacting inputs (including a methodology for selecting the most important inputs to be modeled stochastically). The essential limitations of the deterministic capital budgeting methodology are presented: behavioral biases (optimism, asymmetric probability distribution, etc.), incomplete view of the risk return profile, neglecting real options (be it to evaluate a project or to reshape it in a value creation perspective), portfolio diversification impact, etc. Through some selected examples, we illustrate how each of these limitations can be mitigated thanks to probabilistic approaches leading to a better decision-making process and ultimately more value creation.
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Hall, John H., and T. Mutshutshu. "Capital budgeting techniques employed by selected South African state-owned companies." Corporate Ownership and Control 10, no. 3 (2013): 177–87. http://dx.doi.org/10.22495/cocv10i3c1art2.
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An analysis of the prior literature revealed few studies on the capital budgeting practices of state-owned companies (SOCs). The goal of this study was therefore to investigate the capital budgeting techniques employed by decision-makers in South African state-owned companies. The results indicated that the NPV and IRR techniques were used by 43% of respondents (the NPV was slightly more popular). WACC emerged as the preferred discount rate for capital budgeting purposes. In considering project risk, state-owned companies seem to prefer sensitivity analysis. It is thus recommended that academics emphasise the importance of NPV as a primary capital budgeting technique.
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Paseda, Oluseun. "A Review of Capital Budgeting Techniques." Issues in Social Science 8, no. 2 (December 4, 2020): 32. http://dx.doi.org/10.5296/iss.v8i2.18034.
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Perhaps the single most important decision faced by management is the selection of investment projects that maximize the present value of shareholders’ wealth. This paper is a review of the literature on capital budgeting procedures. Analytic techniques such as Net present value (NPV), Internal rate of return (IRR), Payback, Discounted Payback, Time-adjusted discounting, Accounting Rate of Return, Profitability Index and Modified IRR are reviewed here. Additional supplementary techniques, when some complexities relating to risk and uncertainty are involved, are also discussed. Results of field surveys are reported. In sum, the results suggest increased prominence of the NPV as an evaluation technique consistent with its much emphasized academic merit. In particular, the Graham and Harvey (2001) survey reveals that the likelihood of using specific evaluation techniques is linked to three factors namely firm size, firm leverage and CEO characteristics. The study recommends the use of real options techniques as they facilitate the linkage of financial objectives with corporate strategy in the ever-increasingly complex business environment.
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Baldenius, Tim, Sunil Dutta, and Stefan Reichelstein. "Cost Allocation for Capital Budgeting Decisions." Accounting Review 82, no. 4 (July 1, 2007): 837–67. http://dx.doi.org/10.2308/accr.2007.82.4.837.
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Investment decisions frequently require coordination across multiple divisions of a firm. This paper explores a class of capital budgeting mechanisms in which the divisions issue reports regarding the anticipated profitability of proposed projects. To hold the divisions accountable for their reports, the central office ties the project acceptance decision to a system of cost allocations comprised of depreciation and capital charges. If the proposed project concerns a common asset that benefits multiple divisions, then our analysis derives a sharing rule for dividing the asset among the users. Capital charges are based on a hurdle rate determined by the divisional reports. We find that this hurdle rate deviates from the firm's cost of capital in a manner that depends crucially on whether the coordination problem is one of implementing a common asset or choosing among multiple competing projects. We also find that more severe divisional agency problems will increase the hurdle rate for common assets, yet this is generally not true for competing projects.
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Shi, Yong, Wikil Kwak, Heeseok Lee, and Cheng-few Lee. "Capital Budgeting with Multiple Criteria and Multiple Decision Makers: A Fuzzy Approach." Journal of Advanced Computational Intelligence and Intelligent Informatics 5, no. 3 (May 20, 2001): 139–48. http://dx.doi.org/10.20965/jaciii.2001.p0139.
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A capital budgeting model with multiple criteria and multiple decision makers (MCMDM) is more likely to provide realistic solutions than linear or goal programming models. This paper adopts a fuzzy approach to solve MCMDM capital budgeting problems. This approach is based on two fundamental human cognitive processes: (i) all decision makers who are involved in the capital budgeting problem have goal setting and compromise behavior for seeking multiple criteria, and (ii) each decision maker has a preference for the budget availability level. A solution procedure is proposed to systematically identify a fuzzy optimal selection of possible projects that can not only reach the best compromise value for the multiple criteria, but also use the best budget availability level according to the multiple decision makers’ preferences. The optimal selection can help the firm make a realistic decision regarding its strategic investment. A comparison study of the fuzzy approach with other approaches shows the advantages of using the fuzzy approach.
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Parry, H. M. A., and C. Firer. "Capital budgeting under uncertainty: An empirical study." South African Journal of Business Management 21, no. 3 (September 30, 1990): 52–58. http://dx.doi.org/10.4102/sajbm.v21i3.917.
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The practices of and attitudes towards risk analysis in South African industrial companies is studied. Major findings are that few companies use the sophisticated methods of risk analysis recommended in the financial literature; there is a wider use of quantitative techniques by the more capital intensive companies; there is general dissatisfaction with the application of these techniques in industry; companies perceive a need for more use of quantitative risk-analysis techniques to aid decision-making. It is hoped that a greater understanding of the current practices of risk-analysis techniques and the attitudes of decision-makers will assist in the selection of appropriate capital budgeting methodologies to improve investment decisions made under uncertainty.Die praktyk van, en die houding teenoor risiko-analise in Suid-Afrikaanse nywerheidsmaatskappye word bestudeer. Die belangrikste bevindinge is dat min maatskappye gebruik maak van die verfynde metodes van risikoanalise soos in finansiele literatuur bespreek; dat daar 'n groter toepassing is van kwantitatiewe tegnieke deur die meer kapitaalintensiewe ondernemings; dat daar algemene ontevredenheid oor die toepassing van die tegnieke heers; maatskappye besef die behoefte om in 'n groter mate gebruik te maak van die kwantatiewe risikometodes vir besluitneming. Daar word vertrou dat groter begrip van die lopende praktyk van risikoanalise en die houding van besluitnemers sal bydrae tot beter keuses van geskikte kapitaalbegrotingsmetodes om beleggingsbesluite te neem in onsekere omstandighede.
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UDOKA, CHRIS O., IBOR I. BASSEY, and OKA FELIX ARIKPO. "CAPITAL BUDGETING: A CRITICAL MODEL FOR STRATEGIC DECISION MAKING IN MANUFACTURING COMPANIES IN CROSS RIVER STATE, NIGERIA." JOURNAL OF SOCIAL SCIENCE RESEARCH 6, no. 1 (December 18, 2014): 967–73. http://dx.doi.org/10.24297/jssr.v6i1.3454.
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This study examined capital budgeting as a critical model for strategic planning in manufacturing companies in Cross River State, Nigeria. The objectives of the study were to examine the degree of relationship between the adoption of NPV model and the return on investment in manufacturing firms in Nigeria; to investigate the extent to which capital budgeting models could influence strategic planning in manufacturing firms in Nigeria. In order to achieve these objectives, three research hypotheses were tested at 5% level of significance. The survey research design was adopted and a well structured questionnaire was constructed to gather data for the study. The questionnaire was administered on 108 respondents comprising the management and operational staff of quoted firms in Cross River State. The Pearson product moment correlation statistical technique was applied. Findings resulting from the test revealed that capital budgeting model influenced significantly strategic planning and managerial decisions. The NPV model was found to be positively correlated with manufacturing firms returns on investments. Based on these findings, it was recommended that corporate planners should train management and line staff on the right application of capital budgeting models. Managers were encouraged to constantly appraise investments alternatives weigh in the results of capital budgeting estimation and their strategic planning process.
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Narayanaswamy, C. R., James R. Webb, and Chand Midha. "CORPORATE DEBT CAPACITY AND THE CAPITAL BUDGETING DECISION: AN EXTENSION." Financial Review 20, no. 3 (August 1985): 87. http://dx.doi.org/10.1111/j.1540-6288.1985.tb00265.x.
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Pike, Richard. "Do Sophisticated Capital Budgeting Approaches Improve Investment Decision-Making Effectiveness ?" Engineering Economist 34, no. 2 (January 1989): 149–61. http://dx.doi.org/10.1080/00137918908902983.
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Mittoo, Usha R. "Evaluating the Foreign Listing Decision in a Capital Budgeting Framework." Managerial Finance 20, no. 8 (August 1994): 22–35. http://dx.doi.org/10.1108/eb018484.
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Monahan, Thomas F., Matthew J. Liberatore, and David E. Stout. "Decision support for capital budgeting: A model for classroom presentation." Journal of Accounting Education 8, no. 2 (September 1990): 225–39. http://dx.doi.org/10.1016/0748-5751(90)90004-q.
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Kesto, Dakito Alemu, and Jaladi Ravi. "Capital Budgeting Practices in Financial Institutions (FIs): An Empirical Study in the Case of Ethiopia." Global Disclosure of Economics and Business 6, no. 1 (June 30, 2017): 29–40. http://dx.doi.org/10.18034/gdeb.v6i1.114.
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Capital budgeting is the process that requires planning for setting up budgets on projects expected to have long-term implications, which is used as a standard for decision making for any organization. This study attempts to explore the capital budgeting practices in FIs and to ascertain if they had guidelines for capital budgeting techniques. The finding shows that, even if the firms in the sector have made significant investment on long-term assets only 42.9% of the firms were properly practiced the modern approaches of investment evaluation methods. Moreover, the most commonly used long-term investment evaluation techniques were PBP, NPV and IRR respectively. On the other hand, except one firm, which conducts partial analysis about the feasibility, almost all other firms in the sector did not make detail evaluation about the feasibility of investment while opening new branches which similar to study conducted by Eyob Dagne (2010). Similarly, the study also found negligence on the application of cost of capital as most firms were found using the cost of debt while discounting their cash flows despite the fact that most firms were found financing their projects using both debt and equity. In a similar vein, less than 30% of firms in the sector, of those apply capital budgeting techniques while evaluating long-term assets, used risk evaluation approaches. On top of this, inflation is also an area where firms have not paid much attention in their capital budgeting decision making. The study concluded by opening area for further research on how capital budgeting could be used for efficient resource allocation in the process of budgeting in developing countries.