Integrating Sustainability in Capital Budgeting Decisions

Marinilka Barros Kimbro ()
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Marinilka Barros Kimbro: Seattle University

A chapter in Corporate Sustainability, 2013, pp 103-114 from Springer

Abstract: Abstract This chapter discusses how to integrate sustainability and environmental impacts into capital budgeting decision-making by including: life-cycle-assessment (LCA), life-cycle costing (LCC), eco-efficiency (EE) and full-cost accounting (FCA) appraisal techniques. This comprehensive investment analysis – from “cradle to grave”- provides a template by which hidden environmental costs and benefits can be identified, analyzed and priced thus resulting in a better prediction of cash flows. The model also integrates environmental risks into the risk-rate component of the cost of capital by developing a sustainability risk-rate and sustainability-cost NPV that captures the sustainability exposure of each capital project alternative.

Keywords: Cash Flow; Life Cycle Cost; Capital Asset; Life Cycle Assessment; Capital Budget (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:csrchp:978-3-642-37018-2_5

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DOI: 10.1007/978-3-642-37018-2_5

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