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2002•UiTM Institutional Repositories (Universiti Teknologi MARA)Open access

Capital budgeting in investment and project appraisal / Wong Soon Heng

Soon Heng Wong

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Abstract

This article critically evaluates the relative attractions of the Net Present Value (NPV) method in capital budgeting. The author argues for the NPV method over the Internal Rate of Return (IRR) method. The implications of inflation for investment appraisal are discussed in the later part of this article. The author opines that in capital budgeting, particularly for projects with a long life, the inflation factor cannot be ignored.

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This article critically evaluates the relative attractions of the Net Present Value (NPV) method in capital budgeting. The author argues for the NPV method over the Internal Rate of Return (IRR) method. The implications of inflation for investment appraisal are discussed in the later part of this article. The author opines that in capital budgeting, particularly for projects with a long life, the inflation factor cannot be ignored.

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Available abstract

This article critically evaluates the relative attractions of the Net Present Value (NPV) method in capital budgeting. The author argues for the NPV method over the Internal Rate of Return (IRR) method. The implications of inflation for investment appraisal are discussed in the later part of this article. The author opines that in capital budgeting, particularly for projects with a long life, the inflation factor cannot be ignored.

Key concepts: Capital budgeting, Internal rate of return, Net present value, Inflation (cosmology), Economics, Capital (architecture), Present value, Investment (military)

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