An Overview of the Capital Budgeting Techniques Practiced by the Companies of Dhaka Stock Exchange Limited

Mohammad Rezaul Islam, Asma Akter Shelly

Abstract


This study explores the capital budgeting techniques used by Bangladeshi
companies in evaluating capital investment projects. For this study data were collected from
the listed companies of Dhaka Stock Exchange Limited (DSE). The findings of the study
reveal that the Net Present Value (NPV) is most preferred technique for evaluating
investment projects in terms of profitability while sensitivity analysis is used as a technique
for assessing risk of the project. It is also documented that managers generally use more than
one technique for evaluating investment projects. However, they emphasize more on the
result of Net Present Value (NPV) to select the right one from the conflicting results. In this
study the return on investment (ROI) and net profit margin are also observed as the other
determinants of evaluating capital investment projects.


Keywords


Capital Budgeting, Net Present Value (NPV), Internal Rate of Return (IRR), Pay Back Period (PBP), Discounting Payback Period (DPBP), Profitability Index (PI), Accounting Rate of Return (ARR).

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ISSN-1682-2498