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Investment Appraisal Process

Author

Listed:
  • Akalu, M.M.
  • Turner, J.R.

Abstract

This case study examines the capital budgeting practices of two chemical companies. It is found that the companies apply the value management tools to supplement the DCF measures. In addition, the R&D projects are assessed using qualitative methods. Moreover, the study revealed the symptom of a trend shift in the choice of investment appraisal techniques from traditional DCF to the newly crafted value management models.

Suggested Citation

  • Akalu, M.M. & Turner, J.R., 2001. "Investment Appraisal Process," ERIM Report Series Research in Management ERS-2001-78-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:141
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    File URL: https://repub.eur.nl/pub/141/erimrs20020109141842.pdf
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    References listed on IDEAS

    as
    1. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    2. Erkki K. Laitinen, 1997. "Estimation of Internal Rate of Return Under Nonsteady Conditions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(9‐10), pages 1217-1251, October.
    3. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory‐Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5‐6), pages 603-626, June.
    4. Fernández, Pablo, 2002. "EVA, Economic profit and cash value added do NOT measure shareholder value creation," IESE Research Papers D/453, IESE Business School.
    5. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5&6), pages 603-626.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    DCF methods; investment appraisal; project; shareholder value analysis; value management techniques;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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