A Survey of Capital Budgeting Techniques in the Public and Private Sectors of a Less Developed Country (LDC)

Abstract

ABSTRACT This study surveys the capital budgeting practice in private and commercially-oriented public sector enterprises in the Sudan, an African Less Developed Country (LDC). The study attempts to fill a gap in the existing literature by documenting the capital budgeting practice in an LDC where the economic environment is different than the developed and developing counterparts and where public sector still plays a major role in the economy. The study found a sizable number of commercially-oriented public corporations that do not use capital budgeting techniques in their capital investment decisions while the majority of private sector companies use these methods. Among the corporations that use capital budgeting methods, both in the public and private sector, the payback method (PB) is the most widely used method, followed by the Internal Rate of Return (IRR) and Net Present Value (NPV) in the private sector and the public sector respectively. The study also revealed additional factors such as cost, size, quality, experience and hard currency requirements that affect the capital budgeting process in both sectors. However, there are differences in the level of importance of these factors between the two sectors.