Abstract
This paper furthers the understanding of capital budgeting by reviewing two individual capital investment decisions taken by manufacturing firms in South Africa. This study indicates that managers do not base their capital investment decisions on a comparison of the expected value of potential investment opportunities as recommended by theory. Rather they follow a multi-stage filtering process and reduce the list of projects by establishing the alignment with the firm’s strategic goals on a qualitative basis. Discounted cash flow project evaluation methods (among others) are then used to confirm that the selected projects are expected to achieve satisfactory levels of financial performance. This analysis promotes a better understanding of the unexpectedly limited use of discounted cash flow techniques by managers in capital investment decision making.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
