Capital Budgeting for Small Businesses: An Appropriate Modification of Net Present Value

John B. White and Morgan P. Miles
Additional contact information
John B. White: Georgia Southern University
Morgan P. Miles: Georgia Southern University

Journal of Entrepreneurial Finance, 1993, vol. 3, issue 1, 79-95

Abstract: This paper sets forth a capital budgeting technique that is both theoretically correct and sensitive to the special financing needs of the small business. This technique involves evaluating cash flows and determining if they are sufficient to meet the loan payment schedule. A sufficient amount of cash flow must remain after debt obligations are met to compensate the equity investment. Net operating cash flows are discounted at the cost of equity while the tax shield from interest and depreciation is discounted at the cost of debt.

Keywords: Capital Budgeting; Small Business; Net Present Value; NPV (search for similar items in EconPapers)
JEL-codes: G32 L25 (search for similar items in EconPapers)
Date: 1993
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://jefsite.org/RePEc/pep/journl/jef-1993-03-1-f-white.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pep:journl:v:3:y:1993:i:1:p:79-95

Access Statistics for this article

More articles in Journal of Entrepreneurial Finance from Pepperdine University, Graziadio School of Business and Management Contact information at EDIRC.
Bibliographic data for series maintained by Craig Everett ().