Capital Budgeting Evaluation Techniques

Pamela P. Drake, Frank J. Fabozzi and Francesco A. Fabozzi

Chapter 13 in Introduction to Finance:Financial Management and Investment Management, 2022, pp 345-379 from World Scientific Publishing Co. Pte. Ltd.

Abstract: As explained in the previous chapter, capital budgeting decisions involve the long-term commitment of a company’s scarce resources in long-term investments or projects. The focus in the previous chapter was to explain the types of capital budgeting projects and to estimate the cash flow that will be generated from the project. While the estimation of a project’s net cash flows is an important step in the capital budgeting decision, making a capital budgeting decision requires analyzing these cash flows to determine whether the project should be undertaken. Our focus in this chapter is on the economic evaluation techniques that are used in making capital budgeting decisions (i.e., to accept or reject the undertaking of a project).

Keywords: Financial Management; Investment Management; Derivatives; Common Stock; Bonds; Company Analysis; Entrepreneurial Finance; Financial Instruments; Financial System; Financial Statements; Time Value of Money; Yields; Present Value; Future Value; Financial Strategy; Dividend Policy (search for similar items in EconPapers)
JEL-codes: G1 G3 N2 O16 (search for similar items in EconPapers)
Date: 2022
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