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The Extent of Using Capital Budgeting Techniques in Evaluating Manager¡¯s Investments Projects Decisions (A Case Study on Jordanian Industrial Companies)

Author

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  • Osama Samih Shaban
  • Ziad Al-Zubi
  • Ahmad Adel Abdallah

Abstract

The aim of this research paper is to study the extent of using capital budgeting techniques on choosing the suitable project for investment. The current research study focused on capital budgeting techniques such as Net Present Value NPV, and Internal Rate of Return IRR, and Pay Back period PB, which is considered the main tools in the hands of decision makers in deciding the best possible alternative of investment. In order to achieve the purposes of the study a questionnaire have been created (based on Graham and Harvey survey in 2001), the aim was to cover most of the Jordanian industrial companies despite of their size and ownership in the current year 2017. Resolution data were analyzed using the statistical program SSPS. Finally, the study concluded that, 58% of Jordanian industrial companies use the Net Present Value, 22% use the Payback Period, 12% use the Internal Rate of Return, and the remaining used a combination of the Accounting Rate of Return, Profitability Index, and sensitivity analysis. The current research study is expected to assess management in choosing the best capital budgeting technique in the evaluation of its future investment projects.

Suggested Citation

  • Osama Samih Shaban & Ziad Al-Zubi & Ahmad Adel Abdallah, 2017. "The Extent of Using Capital Budgeting Techniques in Evaluating Manager¡¯s Investments Projects Decisions (A Case Study on Jordanian Industrial Companies)," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(12), pages 175-179, December.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:12:p:175-179
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    References listed on IDEAS

    as
    1. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
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    Cited by:

    1. Ahmad N. H. Anabtawi, 2018. "The Extent of Using and Trusting Capital Budgeting Methods in Projects Appraisal in Palestinian Corporations," Modern Applied Science, Canadian Center of Science and Education, vol. 12(6), pages 151-151, June.

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    More about this item

    Keywords

    capital budgeting techniques; internal rate of return; Jordanian industrial companies; net present value; pay back period;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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