Comparing project prioritization method and net present value method of capital rationing using Kendall's Tau distance

College

Ramon V. Del Rosario College of Business

Department/Unit

Accountancy

Document Type

Conference Proceeding

Source Title

5th IEEE International Conference on Management of Innovation and Technology, ICMIT2010

First Page

95

Last Page

100

Publication Date

7-30-2010

Abstract

This study is the result of management's intention to optimize their various capital investment decision processes within the organization. Since huge amount of corporate funds are allocated to capital expenditure, the management of the firm decided to look for an alternative capital rationing technique to revise the traditional method (i.e. net present value) that they are currently using. The alternative model should incorporate the non-financial aspects such as performance measurements to determine how performance and other factors may be altered to create the most utility for the least cost, in terms of the firm's service cost, support cost and social cost. With this need of including qualitative factors in the selection of firm's capital investment projects, an alternative model called the Project Prioritization Method (PPM) using as tool the Analytic Hierarchy Process (AHP) was developed. © 2010 IEEE.

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Digitial Object Identifier (DOI)

10.1109/ICMIT.2010.5492833

Disciplines

Accounting

Keywords

Capital investments; Capital budget; Net present value; Multiple criteria decision making

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