St’mary university business faculty department of accounting

Characteristics of capital investment decision ......................................................................... 16

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ALEMTSEHAY BEYENE
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2.2. Characteristics of capital investment decision ......................................................................... 16
2.3 Capital budgeting process. 17
2.3.1 Steps in capital budgeting process. 17 2.3.2 Data requirement in capital budgeting. 19 2.3.3 Guidelines for capital budgeting. 20
2.4. Basic criteria for investment Decisions .................................................................................... 21
2.5 Capital investment Appraisal Techniques ................................................................................ 22
2.5.1 Discounted cash flow techniques. 23
Net present value (NPV)
................................................................................................................ 23
Internal Rate of return (IRR)
.......................................................................................................... 24
Profitability index (PI)
................................................................................................................... 25 2.5.2 Non Discounted cash flow techniques. 25
Payback period
.............................................................................................................................. 25

6
Accounting rate of return (ARR)
.................................................................................................... 26
2.6. Sensitivity and what if Analyses ............................................................................................. 26
2.6.1 Sensitivity Analysis. 26 2.6.2 Scenario Analysis. 27 2.6.3 Simulation. 27
2.7 Empirical Review ....................................................................................................................... 28
CHAPTER THREE. 29 3. DATA PRESENTATION AND ANALYSIS. 29
3.1 Background information of the study population ..................................................................... 29

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