Capital Budgeting.
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Essay 3 - Capital Budgeting Capital budgeting has received an increasing attention over the last ten years. Most studies have focused either on the relationships between investment decisions and financial theory, or on behavioural aspects of Capital Budgeting. The separation between analytical and organizational-behavioural aspects of budgeting, which has been criticized by many authors, appears particularly critical today: in fact, the implementation of new techniques in the analysis of investments - such as discounted cash flow modified methods, strategic options, scoring methods, analytic hierarchy process, fuzzy-logic approaches - requires an extremely accurate analysis that cannot be led only by the branch of the organization supporting the investment proposal, or by financial staffs, either. In this paper I will explore two methods (decision tree analysis and option methods) and examine how they can be used in capital budgeting. An effective and proactive strategic management of technology involves various decisions: from the formulation of...


