Capital budgeting techniques employed by selected South African state-owned companies

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Authors

Hall, J.H. (John Henry)
Mutshutshu, Tendani

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Journal ISSN

Volume Title

Publisher

Virtus Interpress

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.

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Keywords

Net present value (NPV), Internal rate of return (IRR), Weighted average cost of capital (WACC), Capital budgeting techniques, State-owned companies (SOCs)

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Citation

Hall, JH & Mutshutshu, T 2013, 'Capital budgeting techniques employed by selected South African state-owned companies', Corporate Ownership and Control, vol. 10, no. 3, pp. 177-187.