EVALUATING THE ECONOMIC AND FINANCIAL MERITS OF CAPITAL PROJECTS: INSIGHTS INTO IMPLEMENTATION ISSUES WITHIN A FIRM

Abstract

The effective implementation of capital project approval techniques within a firm is crucial in maximizing shareholder value. This requires a disciplined and uniform approach, with established policies and procedures from corporate headquarters. The financial evaluation process should consider the merits of the project, incremental cash flow analysis, and various project evaluations. The article focuses on the guidelines for project evaluation and authorization, the models for economic and financial valuation, the data requirements and collection process, and standardized documentation for corporate approval. The author illustrates the approach used with a detailed numerical example, emphasizing the importance of a well-functioning and efficient capital investment process. Finally, the article suggests that further research in financial analysis is necessary to aid students and practitioners in their understanding and appreciation of the evaluation process