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CAPITAL BUDGETING TECHNIQUES EMPLOYED BY SELECTED SOUTH AFRICAN STATE-OWNED COMPANIES

J.H. Hall, T. Mutshutshu

DOI: 10.22495/cocv10i3c1art2

Abstract

An analysis of the prior literature revealed few studies on the capital budgeting practices of state-owned companies (SOCs). The goal of this study was therefore to investigate the capital budgeting techniques employed by decision-makers in South African state-owned companies. The results indicated that the NPV and IRR techniques were used by 43% of respondents (the NPV was slightly more popular). WACC emerged as the preferred discount rate for capital budgeting purposes. In considering project risk, state-owned companies seem to prefer sensitivity analysis. It is thus recommended that academics emphasise the importance of NPV as a primary capital budgeting technique.

Keywords: Net Present Value (NPV), Internal Rate of Return (IRR), Capital Budgeting Techniques, Weighted Average Cost of Capital (WACC) tellectual Capital, Intangible Assets, Myth

How to cite this paper: Hall, J.H. & Mutshutshu, T. (2013). Capital budgeting techniques employed by selected South African state-owned companies. Corporate Ownership & Control, 10(3-1), 177-187. http://doi.org/10.22495/cocv10i3c1art2

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