The Misapplication Of Capital Investment Appraisal Techniques

Essay specific features

 

Issue:

Business

 

Written by:

Wade R

 

Date added:

March 29, 2014

 

Level:

 

Grade:

A

 

No of pages / words:

21 / 5692

 

Was viewed:

4492 times

 

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Essay content:

In a longitudinal survey of capital budgeting practices of large UK companies between 1975 and 1992, substantial increase in the usage of discounted cash flow (DCF) and risk appraisal techniques was reported. Despite the increased usage of the more theoretically sound discounting techniques, several writers in both the UK and US have claimed that companies are underinvesting because they misapply or misinterpret DCF techniques...
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It has been asserted by several writers that firms are guilty of rejecting worthwhile investments because of the improper treatment of inflation in the financial appraisal. Many firms are understating NPVs and IRRs because of the incorrect treatment of inflation and the use of excessively high discount rates...
displayed 300 characters

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