History and Development of Capital Budgeting Research Paper by scribbler

History and Development of Capital Budgeting
A review of the literature on capital budgeting theory and its applications.
# 153167 | 1,835 words | 8 sources | APA | 2013 | US
Published on May 05, 2013 in Accounting (Financial) , Business (Finance, Investment and Banking)

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The paper outlines the history of capital budgeting theory and explains how the capital budgeting process is used to determine whether resources should be committed to a project whose benefits will be spread over time. The paper then provides a summary of key studies and reviews their empirical evidence of various applications of the capital budgeting process. Finally, the paper looks at unresolved academic issues and provides suggestions for further studies.

Part One: History of Capital Budgeting
Part Two: Summary of Key Empirical Evidence
Part Three: Discussion of Unresolved Academic Issues and Suggestions for Further Studies

From the Paper:

"Today, the capital budgeting process is used to determine whether resources should be committed to a project whose benefits will be spread over time, typically a long period of time (Shim & Siegel, 1999). There are two general types of investments that involve such capital budgeting decisions: 1. Selection decisions in terms of obtaining new facilities or expanding existing facilities; and, 2. Replacement of decisions in terms of replacing existing facilities (Shim & Siegel, 1999, p. 81).
"Capital budgeting can have an enormous impact on the value of a company and its shareholder wealth (Dayananda, Irons, Harrison, Herbohn & Rowland, 2002). For instance, according to Prather, Topuz, Benco and Romer, "Capital budgeting decisions, also known as capital investment or capital expenditure decisions, remain critical to the success of any firm" (2009, p. 2). The relationship between a firm's overarching goal, its financial management practices and the capital budgeting process is illustrated in Figure 1 below (Dayananda et al., 2002).
"As shown in Figure 1 above, a firm's resources can be allocated to either short-term or long-term assets, or a combination of both; however, the capital budgeting process is mostly focused on significant investments of a firm's long-term assets (Dayananda et al., 2002). Such long-term assets can consist of tangible resources including plant or equipment, as well as real property or they can consist of intangible resources such as innovative technologies, patents or trademarks (Dayananda et al., 2002)."

Sample of Sources Used:

  • Baldwin, C. Y. & Clark, K. B. (1994). Capital-budgeting Systems and Capabilities Investments in U.S. Companies after the Second World War. Business History Review, 68(1), 73-75.
  • Danielson, M. G. & Scott, J. A. (2006). The Capital Budgeting Decisions of Small Businesses. Journal of Applied Finance, 16(2), 45-48.
  • Dayananda, D., Irons, R., Harrison, S., Herbohn, J. & Rowland, P. (2002). Capital Budgeting: Financial Appraisal of Investment Projects. Cambridge, England: Cambridge University Press.
  • Halachmi, A. & Sekwat, A. (1997). Strategic Capital Budgeting and Planning: Prospects at the County Level. Public Budgeting and Financial Management, 8(4), 578-579.
  • King, P. (1975, March). Is the Emphasis of Capital Budgeting Theory Misplaced? Journal of Business Finance & Accounting, 2(1), 69-82.

Cite this Research Paper:

APA Format

History and Development of Capital Budgeting (2013, May 05) Retrieved March 31, 2023, from https://www.academon.com/research-paper/history-and-development-of-capital-budgeting-153167/

MLA Format

"History and Development of Capital Budgeting" 05 May 2013. Web. 31 March. 2023. <https://www.academon.com/research-paper/history-and-development-of-capital-budgeting-153167/>