The Fisher Separation Theorem And Capital Budgeting Decisions Of Quoted Firms In Nigeria

This study explored the Fisher separation theorem and capital budgeting decisions of quoted firms on the Nigerian stock exchange. A sample of 60 questionnaires were filled and returned by staffs from particular sectors like manufacturing, health and agriculture. Descriptive statistics was employed to illustrate the data while the Spearman rank order correlation test was used to determine if a significant relationship exist among the variables. From the estimates, the Net Present Value and Modified Internal Rate of Return are regularly employed by firms in making capital budgeting decisions. Also, when firms employ capital budgeting tools, it creates wealth for both managers and shareholders, providing support for the Fisher’s separation theorem. Finally, a correlation coefficient of 0.827 reflect a positive and linear relationship between capital budgeting decision and Shareholders’ value creation. Thus, an increase in capital budgeting decisions result to an increase in value creation. This outcome is consistent with findings from other economies and previous studies. It thus recommends that firms in the Nigerian environment should ensure they play down on shareholders’ desire for dividends and instead redirect their funds to more investments by employing suitable capital budgeting decisions.

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Evaluation of Investment Projects: A Case from Turkish Cement Sector

International Conference on Eurasian Economies 2016 ◽

10.36880/c07.01587 ◽

2016 ◽

Author(s):

Miyase Karabulut ◽

Sıtkı Sönmezer ◽

Vedat Zeki Yenen ◽

Zeynep Emir

Keyword(s):

Qualitative Research ◽

Net Present Value ◽

Capital Budgeting ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Investment Projects ◽

Preliminary Results ◽

Internal Rate ◽

Exclusive Or

Capital budgeting is crucial for firms that have projects to evaluate especially when the projects are mutually exclusive or financing is scarce. The aim of the study is to determining the most widely used methodologies in capital budgeting decisions and their effectiveness. A qualitative research will provide cement sector specific examples in assessing industry projects and compares the methods of Net Present Value, İnternal rate of Return, Pay-back period, discounted pay-back period and MIRR. Each method is briefly discussed and its drawbacks and advantages are mentioned in detail. Other sectors are also examined in terms of capital budgeting. Our preliminary results indicate that net present value method dominates capital budgeting decisions in the sectors under study.

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Reinvestment Bias When Analyzing Mutually Exclusive Assets

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v2i3.6572 ◽

2011 ◽

Vol 2 (3) ◽

pp. 71

Author(s):

Robert J. Sweeney

Keyword(s):

Net Present Value ◽

Capital Budgeting ◽

Cash Flows ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Internal Rate ◽

Current Period ◽

The Cost ◽

Flows Over Time

Capital budgeting decisions generally involve the commitment of resources in the current period to secure positive cash flows over time that generate a rate of return in excess of the cost of the funds invested. The most common techniques used to perform this analysis are the Net Present Value (NPV) and the Internal Rate of Return (IRR).Conceptually, these two techniques are substitutable; i.e. the resulting decision from a NPV analysis is identical to the decision from an IRR analysis. In practice, however, the NPV and the IRR can, on occasion, produce conflicting decisions. Specifically, when analyzing mutually exclusive assets the Net Present Value can support one asset while the Internal Rate of Return supports the other. The purpose of this paper is twofold; first, to highlight structural deficiencies in the conventional application of the NPV and the IRR, and second, to demonstrate a procedure to correct for these structural errors.

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Three Corporate Finance Practices in Pakistan: A Review of Previous Studies and Way Forward

Journal of Finance and Accounting Research ◽

10.32350/jfar.0301.04 ◽

2021 ◽

Vol 3 (1) ◽

pp. 61-84

Author(s):

Umar Farooq ◽

Bilal Haider Subhani

Keyword(s):

Capital Structure ◽

Corporate Finance ◽

Net Present Value ◽

Capital Budgeting ◽

Payout Policy ◽

Debt Financing ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Dividend Payout

This study reviews the empirical studies arranged on Pakistani capital market and specifies the pattern of three corporate finance practices. The subject of corporate finance discusses the various activities performed at firm level such as capital budgeting, capital structure, and dividend payout policy. The capital budgeting technique consists of six methods i.e., net present value, discounted cash flow, payback period, and internal rate of return etc. but Pakistani firms often interested in net present value and internal rate of return for capital investment evaluation. Similarly, the capital structure decision carries the debate on two options of financing i.e., debt financing and equity financing but literature shows that the Pakistani firms generally follow the pecking order theory and prefer more debt financing. Similarly, as for concern dividend payout policy, literature discusses the different theories and determinants but still unable to generalize the dividend payout trend specifically in Pakistani context. Corporate managers and policymakers can use the conclusion for strategic purposes.

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Risk Manage Capital Investment Decisions: A Lease vs. Purchase Illustration

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v25i3.1031 ◽

2011 ◽

Vol 25 (3) ◽

Author(s):

Thomas L. Zeller ◽

Brian B. Stanko

Keyword(s):

Capital Investment ◽

Net Present Value ◽

Investment Decisions ◽

Capital Budgeting ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Wealth Creation ◽

Font Size ◽

Present Value ◽

Internal Rate

This paper demonstrates how to build risk into capital investment decisions.  We illustrate how to combine distribution theory, technology, and a business professional’s skills and insight into a capital investment analysis.  In addition, we show how management can approximate the risk of each cash flow estimate and display the overall capital investment results.  This framework is extended by showing how a mutually exclusive decision can be improved, using a lease versus purchase example.<a style="mso-footnote-id: ftn1;" name="_ftnref1" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftn1">[1]</a>  An Excel template is readily available from the authors allowing a hands-on application of the framework presented in this paper.  In addition, this paper positions the reader to comfortably use more advanced analytics, such as Monte Carlo simulation, a tool that is readily available in commercial software applications.<div style="mso-element: footnote-list;"> <hr size="1" /><div id="ftn1" style="mso-element: footnote;">This paper focuses on the application of net present value.  The advantage of using net present value in a capital budgeting decision is that it shows the potential stakeholder wealth creation and wealth destruction.  An internal rate of return analysis is intentionally left out of this paper.  According to Brealey, Myers and Allen, Principles of Corporate Finance, New York, NY: McGraw-Hill/Irwin 2006, pp. 91-99, internal rate of return should not be used to evaluate mutually exclusive capital investments.  </div></div>

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An analysis of capital budgeting methods, the cost of capital and decision-makers in listed South African firms

Corporate Ownership and Control ◽

10.22495/cocv9i2c5art7 ◽

2012 ◽

Vol 9 (2) ◽

pp. 519-529

Author(s):

John H. Hall

Keyword(s):

South African ◽

Net Present Value ◽

Cost Of Capital ◽

Capital Budgeting ◽

Decision Makers ◽

Internal Rate Of Return ◽

Present Value ◽

The Cost ◽

Academic Qualifications ◽

A Company

This study’s purpose was to link the length of decision-makers’ employment in a firm and their academic qualifications to their choice of capital budgeting methods and of cost of capital techniques. The results show that the net present value (NPV) is more popular than the internal rate of return (IRR) as a capital budgeting technique. Also, irrespective of how long respondents have been employed by a company, they all use a discount rate. However, there is a significant tendency among respondents with postgraduate qualifications to prefer the NPV as a capital budgeting technique. Thus, in South Africa, academic qualifications do play a role in decision-makers’ capital budgeting practices.

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Analisis Kelayakan Pengembangan Usaha Pasta Kangen Jupiter dan Mogot Jakarta Barat dengan Menggunakan Metode Capital Budgeting Tahun 2019-2023

Reviu Akuntansi, Manajemen, dan Bisnis ◽

10.35912/rambis.v1i1.401 ◽

2021 ◽

Vol 1 (1) ◽

pp. 9-14

Author(s):

Ni Puthu Eka Wardani Haliasih ◽

◽

Pambuko Naryoto ◽

Keyword(s):

Research Methodology ◽

Net Present Value ◽

Average Rate ◽

Capital Budgeting ◽

Payback Period ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Internal Rate

Abstract Purpose: This study aimed to determine the feasibility of establishing the Pasta Kangen Jupiter dan Mogot Jakarta Barat in West Jakarta. Research methodology: The assessment is reviewed with Capital Budgeting in Optimistic, Moderate, and Pessimistic versions. Several methods include Payback Period, Net Present Value, Profitability Index, Average Rate of Return, Internal Rate of Return, dan Discounted Payback Period. Results: Based on the results of calculations using the Optimistic and Moderate Version of Capital Budgeting method, Pasta Kangen Jupiter Daan Mogot Jakarta Barat business in West Jakarta is feasible to run, while the Pessimistic Version is not feasible to run.

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Analisa Kelayakan Capital Budgeting Jaringan Backbone Kabel Serat Optik Palapa Ring Studi Kasus : Palapa Ring Barat

Jurnal Telekomunikasi dan Komputer ◽

10.22441/incomtech.v9i2.6472 ◽

2019 ◽

Vol 9 (2) ◽

pp. 87

Author(s):

Nurwan Reza Fachrurrozi

Keyword(s):

Net Present Value ◽

Capital Budgeting ◽

Payback Period ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Internal Rate

Dalam rangka masyarakat Indonesia yang modern dan berbasis informasi, pemerintah bekerjasama dengan beberapa perusahaan telekomunikasi swasta menggelar mega-proyek pembangunan jaringan infrastruktur telekomunikasi berupa jaringan backbone kabel serat optik berkecepatan tinggi yang dinamakan Palapa Ring. Tujuan Palapa Ring antara lain untuk mengurangi kesenjangan digital antara Indonesia Bagian Barat & Indonesia Bagian Timur serta menyediakan akses telekomunikasi bagi masyarakat dengan tujuan pemerataan akses informasi untuk meningkatkan kesejahteraan dan mengurangi kemiskinan. Dalam perancangan jaringan ekstensi, parameter diatas ditambah lagi dengan proyeksi kapasitas jaringan yang dibutuhkan untuk beberapa tahun kedepan. Landing Stations ini terdiri dari 12 Kota Pantai beserta analisa penempatannya yang tidak semuanya sama dengan rekomendasi KMI. Untuk proyeksi kebutuhan kapasitas, didapatkan angka kebutuhan kapasitas untuk masing-masing Landing Stations sampai tahun 2033. Penelitian ini bertujuan untuk menganalisa kelayakan dari rencana investasi yang akan dilaksanakan PT. XXX. Rencana investasi ini berupa pembangunan proyek Palapa Ring Barat dengan total investasi sebesar Rp. 1,000,000,000,000 dengan tingkat bunga sebesar 18% & 30%. Dengan alat analisis Payback Period, Discounted Payback Period, Net Present Value, dan Internal Rate Of Return. Tiga alat analisis tersebut dipakai juga oleh PT. XXX untuk mengukur layak atau tidaknya proyek tersebut. Dari hasil analisis dan rencana proyek Palapa Ring Barat diperoleh Payback Period (PP) 3 tahun 1 bulan dan Discounted Payback Period 4 tahun 5 bulan dari target PT. XXX yaitu 15 tahun, Net Present Value (NPV) Rp. 1,392,644,795,000 dari target yang di tentukan PT. XXX yang hasilnya positif, Internal Rate Of Return (IRR) 35 % dari 18 % & 30 % yang di targetkan oleh PT. XXX. Dan juga didapatkan hasil Subsidi KPBU dari pemerintah Rp. 1,490,772,000,000 dengan rincian simulasi pembayaran selama 15 Tahun dengan Interest 0 % sebesar Rp. 99,384,800,000 / Tahun.

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Capital Budgeting Analysis to Assess the Karaoke Business Feasibility

PINISI Discretion Review ◽

10.26858/pdr.v3i1.13271 ◽

2019 ◽

Vol 3 (1) ◽

pp. 47

Author(s):

Panji Galih Kusumo Adie

Keyword(s):

Net Present Value ◽

Capital Budgeting ◽

Payback Period ◽

Feasibility Analysis ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Initial Capital ◽

A Value ◽

The People

One form of entertainment that is currently being developed and in demand by the people of Jakarta and its surroundings is karaoke. This study aims to determine the results of the investment assessment of Karaoke Taxi using Capital Budgeting techniques in knowing the level of investment feasibility. The results of calculations with the Net Present Value method value of Rp. 92,061,946,333 with an initial capital of Rp. 80,000,000,000. While based on the feasibility analysis using the Profitability Index, the Karaoke Taxi business project got a value of 2.15, this result exceeds the number 1. Based on the feasibility analysis using the Internal Rate of Return a value of 40.18 percent was obtained. For the feasibility analysis using the Discounted Payback Period, the result of the Karaoke Taxi business project will return in the year 3,872, the return of investment is faster than required by the company (4 years).

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ANALISIS CAPITAL BUDGETING TERHADAP KELAYAKAN INVESTASI AKTIVA TETAP PADA PT. KHARISMA ARTA ABADI GUNA LUWUK KABUPATEN BANGGAI

Jurnal Ilmiah Manajemen E M O R ◽

10.32529/emor.v2i1.190 ◽

2019 ◽

Vol 2 (1) ◽

pp. 70

Author(s):

Irwan Moridu ◽

Sitti Damayanti Adista

Keyword(s):

Net Present Value ◽

Average Rate ◽

Capital Budgeting ◽

Payback Period ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Internal Rate

Tujuan yang ingin dicapai dengan diadakannya penelitian ini adalah untuk menganalisis kelayakan rencana investasi asset tetap yang berupa penggantian mesin baru pada PT. Kharisma abadi arta guna luwuk. Adapun teknik yang digunakan dalam penelitian ini adalah deskriptif sedangkan pendekatan yang digunakan adalan kuantitatif, analisis data menggunakan laporan arus kas untuk menghitung Payback Period,Average Rate Of Return,Net Present Value, Profitability index,Internal Rate Of Return. Dari hasil analisis data diperoleh hasil bahwa untuk PP 1 tahun 9 bulan sehingga proyek di terima, untuk ARR dieroleh nilai 51,84%>25% maka proyek investasi diterima,untuk NPV diperoleh nilai positif Rp. 3.825.223.229 maka proyek diterima, dan untuk PI diperoleh nilai 3,5>1 maka investasi layak dilaksanakan. Dari penelitian yang telah dilakukan untuk mengantisipasi kerugian-kerugian yang tidak diharapkan oleh pihak PT. Kharisma Abadi Arta Guna harus melakukan analisis kelayakan investasi sebelum melakukan investasi , agar dapat mengurangi resiko yang terjadi.

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Selecting a Tax Rate for Use in Analyzing Forest Industry Capital Investment

Northern Journal of Applied Forestry ◽

10.1093/njaf/3.3.101 ◽

1986 ◽

Vol 3 (3) ◽

pp. 101-103 ◽

Cited By ~ 1

Author(s):

Bruce G. Hansen

Keyword(s):

Capital Investment ◽

Net Present Value ◽

Capital Budgeting ◽

Substantial Effect ◽

Internal Rate Of Return ◽

Present Value ◽

Investment Performance ◽

Tax Rate ◽

Federal Income Tax ◽

Considerable Discussion

Abstract The tax rate utilized in capital budgeting studies has a substantial effect on investment performance as estimated by the net present value (NPV) and internal rate of return (IRR). Selecting the incorrect federal income tax rate can have a profound effect on investment decisions. Although there is currently considerable discussion in Congress about changing the present tax structure, the consequences of selecting an incorrect tax rate will prevail so long as there is a graduated schedule of any kind. North. J. Appl. For. 3:101-103, Sept. 1986.

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