Journal of Business Finance & Accounting · 2000 · 276 citations · 0 references
Public AffairsAccountancyBusiness EconomicsBudgetingCapital BudgetingCorporate FinanceBudget PreparationCapital Budget PlanningCapital Budgeting AnalysisCapital Budgeting For ProjectsCapital RationingHurdle RatesBudget Preparation ProcessCapital Budget AnalysisCapital Budget PreparationCapital Budgeting DecisionsCapital Budgeting Under InflationCapital Budgeting Under RiskInflation AdjustmentWacc Estimation
We report the results of a survey of capital budgeting techniques used by United Kingdom firms. Where possible, the evidence is combined with data collected over a 22 year period to provide a basis for the discussion of causes of trends. We observe that there has been a substantial narrowing of the theory‐practice gap in the use of project appraisal methods. The gap has also narrowed in other areas: the analysis of risk, inflation adjustment, capital budget preparation, WACC calculation and post‐auditing. However, there are other elements of capital budgeting theory, e.g. probability and beta analysis which have been adopted by very few practising managers. We also discuss non‐economic projects, capital rationing and hurdle rates.