The Effectiveness of Capital Budgeting Techniques in Evaluating Projects Profitability (KEY IJP************168)

• Prakhar Arya

Abstract

This study was conducted to evaluate the effectiveness of capital budgeting techniques in evaluating the profitability of projects. To achieve this goal, which was managed as the CEO of the selected companies was the main data collection tool used in this study. Based on the results of our analysis, the following observations were made: (i) different capital budgeting techniques used in project benefit assessment: profitability, calculated return, present value, internal rate of return, profit index and net final value, (ii) the most important factor influencing the choice of capital budgeting techniques is asset maximization factor, (iii) the capital budgeting technique is not suitable for evaluation projects under conditions of risk and uncertainty, (vi) the most effective capital budgeting technique for evaluating the profitability of risk-free projects is net present value , (v) taxation has no significant impact on project valuation. Therefore, in the current environment of risk and uncertainty, traditional capital budgeting techniques have been proposed to be effective in evaluating project profitability. Therefore, techniques that match the risk-adjusted discount rate and confidence must be used.