The theory of capital budgeting under uncertainty is in a state of unusual flux, and none of the techniques advocated by different authors can be advertised as general. However, it is not difficult

We study a capital budgeting setting wherein a divisional manager exerts personally costly effort to improve the expected profitability of an investment project, and gains private knowledge about the project’s payoff. The manager’s choice of innovation effort is subject to a holdup problem, because

In order to examine the decision process and to answer the question: 'How do we make a decision?', we

This paper addresses the following basic capital budgeting question: Suppose that crosssectional differences in stock returns can be predicted based on variables other than beta (e.g., book-to-market), and that this predictability reflects market irrationality rather than compensation

This document gives a panoramic vision of PEMEX in general and PEMEX Exploración y Producción (PEP) in particular; analyzes the behavior of its investments and its oil potential, which finally constitutes the justification for the “Capital budgeting model ” that PEP successfully employs. This model

This thesis analyzes the impact of capital budget on capital spending in the U.S. states. The analysis is based on the James Poterba's 1995 study of the impact of a capital budget on capital spending using 1962 U.S. state-level data. I first replicate Poterba's model using the 1992

Capital budgeting refers to the process that managers use to make decisions about whether long-term investments or capital expenditures are worth pursuing by their organizations. In other words, capital budgeting is the process of planning, analyzing, selecting, and managing capital investments

Abstract: The goal of our paper is to show how a firm should set its capital budget. Here we discuss how this is done in practice. We give particular attention to how capital budgeting is organized and to the administrative problems that inevitably crop up.

capital budgets are limited. Finally, a project may have several IRRs if cash flows go from negative to positive more than once. The Modified Internal Rate of Return (MIRR), discovered in the 18th century, does account for these cash flows. This article explains the problems with NPV and IRR, describes

This paper presents a linear programming model in which a portfolio of projects is modelled as decision trees. It is also shown how scenario thinking can be combined with a capital budgeting model in order to permit uncertainty considerations. Furthermore, the programming of an option to wait