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Trends in application of capital budgeting methods for investment projects evaluation

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  • Peter Markovič
  • Michal Šinský

Abstract

We present results of an analysis and comparison of 46 studies (54 economic surveys) on capital budgeting methods for investment projects evaluation with emphasis on trends in application from 70s till present. We focus on three methods: net present value method, internal rate of return and payback period for purpose of confirmation/rejecting of a proposition that there exists a "gap" between theoretical recommendations and practice of financial managers in investment projects evaluation. We came to the conclusion of the existence of disproportionate perception between theoretical recommendations and practical application of selected methods. The conclusion confirmed the necessity of the discussion between scientists and financial managers in issue of the investment project evaluation.

Suggested Citation

  • Peter Markovič & Michal Šinský, 2009. "Trends in application of capital budgeting methods for investment projects evaluation," Ekonomika a Management, Prague University of Economics and Business, vol. 2009(1).
    • Handle: RePEc:prg:jnleam:v:2009:y:2009:i:1:id:59
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    More about this item

    Keywords

    Kapitálové rozpočtovanie; Capital budgeting; Metódy ekonomického hodnotenia preferencií investičných projektov; Methods for investment projects evaluation; Metóda čistej súčasnej hodnoty; Net present value method; Metód vnútornej miery výnosnosti; Internal rate of return; Metóda doby úhrady; Payback period;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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