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Author:Mills, R. W.
Title:Capital budgeting - the state of the art
Journal:Long Range Planning
1988 : AUG, VOL. 21:4, p.76-81
Index terms:CAPITAL BUDGETING
PROJECT APPRAISAL
PROJECT MANAGEMENT
PROJECT EVALUATION
RATE OF RETURN
NET PRESENT VALUE
SENSITIVITY ANALYSIS
Language:eng
Abstract:Capital budgeting methods are discussed. Phases of decision-making are described. The basic model for project appraisal is presented as a formula which expresses present market value in terms of forecasted incremental cash flow and the opportunity cost of capital over the duration of the project. The gap between theory and practice is highlighted. Results of research studies are described. Payback period is found to be the most used technique. Methods used by smaller and larger firms are compared. Sensitivity analysis via a computerized package is found to be increasingly popular. It is shown that post audits are often not comprehensive. Suggestions based on the project management approach are summarized.
SCIMA record nr: 69856
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