An empirical study of capital budgeting practices for strategic investments in CIM technologies

Slagmulder, Regine; Bruggeman, Werner; Wassenhove, Luk Van

doi:10.1016/0925-5273(95)00069-7

Cited by 67 publications

(50 citation statements)

References 21 publications

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“…It does not define (i.e., impose) a rate of return for a cashflow stream, but lets rates of return depend on the choice of the decision maker/analyst. Empirical evidence supports the idea that real-life different decision makers choose and use different metrics/rates of return for analyzing an investment (Remer and Nieto 1995a,b, Graham and Harvey 2001, Sandahl and Sjögren, 2003, Slagmulder et al, 1995Hahn and Kuhn, 2012) and that various metrics are often used for the same project (Remer et al, 1993;Lefley,1996;Lindblom and Sjögren, 2009). This is consistent with the AIRR approach, which might then be considered the theoretical support for such an empirical evidence.…”

Section: Insights For Future Research (Iii)supporting

confidence: 62%

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Magni

2016

Journal of Mathematical Economics

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Abstract. This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPVconsistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it is capable of solving the conundrums originated by the rate-of-return notion and represents a unifying theoretical paradigm under which every existing measure of wealth creation can be subsumed. We show that a rate of return is underdetermined by the project's cash-flow stream; in particular, a unique return function (not a unique rate of return) exists for every project which maps depreciation classes into rates of return. The various shapes a rate of return can take on (internal rate of return, average accounting rate of return, modified internal rate of return etc.) derive from the (implicit or explicit) selection of different depreciation patterns. To single out the appropriate rate of return for a project, auxiliary assumptions are needed regarding the project's capital depreciation. This involves value judgment. On one side, this finding opens terrain for a capital valuation theory yet to be developed; on the other side, it triggers the creation of a toolkit of domainspecific and purpose-specific metrics that can be used, jointly or in isolation, for analyzing the economic profitability of a given project. We also show that the AIRR perspective has a high explanatory power that enables connecting seemingly unrelated notions and linking various disciplines such as economics, finance, and accounting. Some guidelines for practitioners are also provided.

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Section: Insights For Future Research (Iii)supporting

confidence: 62%

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Magni

2016

Journal of Mathematical Economics

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“…One method commonly used for SID is the Discounted Cash Flow (DCF)-Analysis (Pike, 1996) (1). The DCF, also known as present value (PV) uses risk-adjusted discount rates (r) to monetise the time frame of SID (Allemann, 2002;Adler, 2000;Slagmulder et al, 1995). The cash flows (c t )…”

Section: Methodology Reviewmentioning

confidence: 99%

“…Thus, SID have a greater need to pay attention to probability of occurrence (Martzoukos & Trigeorgis, 2002). Field studies give evidence that traditional profitability analysis to assess SID is supplanted by substantial sophisticated techniques in terms of linking qualitative and financial aspects (Alkaraan & Northcott, 2006;Adler, 2000;Slagmulder et al, 1995). While the quantification and assignment of cost is examined extensively, there are less methods for the quantification and assignment of long term benefits (Schönheit, 1996;Zangemeister, 1994).…”

Section: Introductionmentioning

confidence: 99%

“…a new assembly line, advanced technology of manufacturing or the launch of new software (Van Cauwenbergh et al, 1996;Slagmulder et al, 1995;Accola 1994). Controlling the complexity and uncertainty surrounding strategic investment decisions presents particular challenges to the management (Alkaraan & Northcott, 2006;Dempsey, 2003;Slagmulder, 1997).…”

Section: Introductionmentioning

confidence: 99%

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Explanatory variables on south-west spot electricity markets integration

Figueiredo¹,

Silva²

Assessment Methodologies: Energy, Mobility and Other Real World Application

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A navegação consulta e descarregamento dos títulos inseridos nas Bibliotecas Digitais UC Digitalis, UC Pombalina e UC Impactum, pressupõem a aceitação plena e sem reservas dos Termos e Condições de Uso destas Bibliotecas Digitais, disponíveis em https://digitalis.uc.pt/pt-pt/termos.Conforme exposto nos referidos Termos e Condições de Uso, o descarregamento de títulos de acesso restrito requer uma licença válida de autorização devendo o utilizador aceder ao(s) documento(s) a partir de um endereço de IP da instituição detentora da supramencionada licença.Ao utilizador é apenas permitido o descarregamento para uso pessoal, pelo que o emprego do(s) título(s) descarregado(s) para outro fim, designadamente comercial, carece de autorização do respetivo autor ou editor da obra. Na medida em que todas as obras da UC Digitalis se encontram protegidas pelo Código do Direito de Autor e Direitos Conexos e demais legislação aplicável, toda a cópia, parcial ou total, deste documento, nos casos em que é legalmente admitida, deverá conter ou fazer-se acompanhar por este aviso. Assessment Methodologies: energy, mobility and other real world application Autor(es):Godinho, Pedro; Dias, Joana The use of assessment methodologies is becoming increasingly important in the decision making process under very different environments. There are increasing concerns about making the best possible use of the limited available resources.There is also an increasing will of justifying the decisions in a sound way. This is even more important when considering public spending, public scrutiny and governance accountability. The use of recognized assessment techniques is actually mandatory in many situations, considering environmental, social, economic and sustainability concerns.This book gathers contributions from several authors, advancing the state-of- m e a s u r i n g T e c h n i c a l e f f i c i e n c y o f e u r o P e a n c o u n T r i e s u s i n g D aTa e n v e l o P m e n T a n a ly s i s e n e r g y e f f i c i e n c y g ov e r n a n c e i n T h e e u r o P e a n u n i o n m e m b e r s TaT e s -a n a ly s i s o n c u r r e n T s TaT We also want to thank Imprensa da Universidade de Coimbra, in particular Maria João Padez, for supporting us in the publication process. The use of assessment methodologies is becoming increasingly important in the decision making process under very different environments.There are increasing concerns about making the best possible use of the limited available resources. There is also an increasing will of justifying the decisions in a sound way. This is even more important when considering public spending, public scrutiny and governance accountability. Energy is strongly intertwined with mobility, with transportation systems accounting for a significant share of energy consumption across the world. Therefore, it is important to address energy and mobility strategies in an integrated fashion, taking into account their mutually influencing aspects. Energy and mobility strategies should contribute to sustain...

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“…Field studies give evidence that traditional profitability analysis assessing SID is supplanted by sophisticated techniques in terms of linking qualitative and (quantitative) financial aspects [1], [9]- [11]. While the quantification and assignment of cost is examined extensively, there are fewer methods for the assignment of long-term benefits [12].…”

Section: Introductionmentioning

confidence: 99%

Long Term Examination of the Profitability Estimation Focused on Benefits

Printz

Lahl

Vossen

et al. 2016

Automation, Communication and Cybernetics in Science and Engineering 2015/2016

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Abstract-Strategic investment decisions are characterized by high innovation potential and long-term effects on the competitiveness of enterprises. Due to the uncertainty and risks involved in this complex decision making process, the need arises for well-structured support activities. A method that considers cost and the long-term added value is the cost-benefit effectiveness estimation. One of those methods is the "profitability estimation focused on benefits -PEFB"-method developed at the Institute of Management Cybernetics at RWTH Aachen University. The method copes with the challenges associated with strategic investment decisions by integrating long-term non-monetary aspects whilst also mapping the chronological sequence of an investment within the organization's target system. Thus, this method is characterized as a holistic approach for the evaluation of costs and benefits of an investment. This participation-oriented method was applied to business environments in many workshops. The results of the workshops are a library of more than 96 cost aspects, as well as 122 benefit aspects. These aspects are preprocessed and comparatively analyzed with regards to their alignment to a series of risk levels. For the first time, an accumulation and a distribution of cost and benefit aspects regarding their impact and probability of occurrence are given. The results give evidence that the PEFB-method combines precise measures of financial accounting with the incorporation of benefits. Finally, the results constitute the basics for using information technology and data science for decision support when applying within the PEFB-method.Keywords-Cost-benefit analysis, multi-criteria decision, profitability estimation focused on benefits, risk and uncertainty analysis.

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An empirical study of capital budgeting practices for strategic investments in CIM technologies

Cited by 67 publications

References 21 publications

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Capital depreciation and the underdetermination of rate of return: A unifying perspective

Explanatory variables on south-west spot electricity markets integration

Long Term Examination of the Profitability Estimation Focused on Benefits

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