Evaluating Capital Expenditures Using Net Present Value

Article Abstract:

When management is considering the purchase of expensive capital equipment, there are several methods available to analyze the financial costs and benefits of the purchase. Several of these methods fail to take into consideration the time value of money - a dollar received today is worth more than a future dollar - but the net present value (NPV) method does consider this variable. To analyze a proposal using the NPV method, there are many steps which must be undertaken, including identification of the type of cash flow, quantification of these flows, and selection of an appropriate cost of capital. Conducting a financial analysis of a project's qualities using the NPV method should lead to the selection of projects which will increase the value of a firm.

Economic aspects, Capital investments, Capital budgets

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Self-appraisal: a solution to evaluating executive performance

Article Abstract:

Self-appraisal offers companies a method for rating executives that compensates for the shortcomings of traditional techniques for rating the performance of top managers. The reasons that self-evaluation would be appropriate include most executives are willing and capable of providing assessments, superiors of executives often possess a limited ability to evaluate their subordinates, and the personal feelings of superiors can be an obstacle to fair evaluations. The guidelines for companies to follow in using self-appraisal include maintaining the superiors' control over evaluations; using appraisals for development, not rewards; and showing the superiors' support for the system.

Methods, Usage, Employee performance appraisals, Performance appraisals, Performance standards, Job performance standards, Self-evaluation, Self evaluation

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Capital budgeting: a key management challenge

Article Abstract:

Aspects of capital budgeting policy that should be considered by financial managers who are establishing or modifying their capital budgeting policies are examined. These include minimum project size requiring formal analysis, primary and secondary capital budgeting methods, and risk and inflation adjustments. The capital budgeting policies are based upon capital budgeting techniques used by 121 companies responding to a survey that expands on previous studies of risk and inflation in capital budgeting decisions.

Management, Risk (Economics), Budget, Budgeting, Budgets, Capital

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