A Survey of Capital Budgeting Techniques Applied by Sugar Companies in Western Kenya
Keywords:
Capital budgeting, investment opportunities, simple payback period, discounted techniquesAbstract
Capital budgeting models have been and continue to remain the predominant means for evaluating and selecting amongst investment opportunities. Firms that choose correctly reap improved financial performance while those that get the decision wrong either suffer losses as a result of making the ill-fated decision or incur a significantly high opportunity cost in the event that they chose not to invest. This study seeks to provide empirical evidence on the current state of practice of capital budgeting techniques among sugar companies in Western Kenya. The findings of the study indicate that most of the sugar companies use a simple payback period as opposed to discounted techniques. This research adds to the body of knowledge on capital investments in general and discounted cash flow analysis in particular, by showing the theory practice gap.
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