TITLE: THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION
It became evident that the payback method is still often used in organizations all over the world despite its criticism by the academicians, making inference from the analysis of companies in Europe, America and Africa. The importance of the payback method, which includes but not limited to its simplicity, liquidity and risk assessment have made the method to be gaining more awareness in appraising investment opportunity by practicing manager.
Contents
Chapter 1
1.0 Introduction
1.1 Research motivation, purpose and justification
1.2 Research focus and aims
1.3 Research methodology
1.4 Background of thesis work
1.5 Outline of thesis work
Chapter 2
2.0 Literature review
2.1 Capital budgeting
2.2 The capital budgeting process
2.2.1 Strategic planning
2.2.2 Identification of investment opportunities
2.2.3 Preliminary screening of projects
2.2.4 Financial appraisal of projects
2.2.5 Qualitative factors in project evaluation
2.2.6 The accept/reject decision
2.2.7 Project implementation and monitoring
2.2.8 Post-implementation audit
2.3 Importance of capital budgeting to the organization
2.4 Theories of methods of capital budgeting
2.5 Capital budgeting techniques
2.5.1 Payback period
2.5.1.1 The Payback Method in relation to the goal function of the company
2.5.1.2 Discounted payback period method (Payback DCF)
2.5.1.3 Advantages of the payback method
2.5.1.4 Disadvantages of the payback method
2.5.2. Net present value (NPV)
2.5.2.1Advantages of net present value
2.5.2.2 Disadvantages of net present value
2.5.3 The internal rate of return (IRR)
2.5.3.1 Advantages of internal rate of return
2.5.3.2 Disadvantages of internal rate of return
2.5.4 The real options approach
2.5.4.1 Advantages of real options approach
2.5.4.2 Disadvantages of real options approach
Chapter 3
3.0 Reasons companies use the payback method
3.1 Simplicity of payback period
3.2 Payback period in relation to pecking-order theory
3.3 Payback period as method for risk assessment in capital budgeting
3.4 Payback period in relation to the size of company
3.5 Management compensation and the role of the payback method
Chapter 4
4.0 European companies
4.1 American companies….
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Author: Alaba Femi Awomewe, Oludele Olawale Ogundele
Source: Blekinge Institute of Technology
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