Assignment 1: Research Proposal 50% Submission: 23:50 via Turnitin. NO need to print Turnitin Similarity Report. • Full Time Class Due Date: 18 May 2017 • Hardcopy to be submitted at Dropbox at PSB...

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Assignment Title
Student Name
Course Name
Instructor Name
Date
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Table of Contents
Introduction ..................................................................................................................................... 3
Literature Review............................................................................................................................ 3
Research Objectives ........................................................................................................................ 9
Research Methodology ................................................................................................................. 10
Research Method ...................................................................................................................... 10
Data Collection ......................................................................................................................... 10
Data Analysis ............................................................................................................................ 11
Limitation .................................................................................................................................. 11
Conclusion .................................................................................................................................... 12
Reference ...................................................................................................................................... 14
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Introduction
Various industry widely uses capital budgeting for selecting the projects that will add
more value to the business. There are various methods available under the capital budgeting that
has both advantage and disadvantage, and they have a direct impact on the decision making of
the company. It is essential to evaluate whether the organization is widely using the theoretical
concept. The main aim of capital budgeting is to boost the decision-making ability of the
management.
In this research paper, the primary objective is to determine the relationship between the
capital budgeting and the business value. The research is based on the secondary sources of
materials that are research papers related to the capital budgeting and organizations. It mainly
focuses on understanding how far organizations are using them and how they make the best use
of capital budgeting while selecting a complex and risky investment.
The three primary research questions are: 1) Whether capital budgeting is widely being
used by many organizations i
espective of their size and the business line to make decisions? 2)
What are the techniques that are used by them for conducting the analysis? And 3) Why
companies are making use of capital budgeting techniques whether they are focusing on boosting
the value of the business? From the analysis, it is clear that more companies are using capital
udgeting techniques to improve the overall decision-making ability of the company that is
crucial for the improving the business value.
Literature Review
Various industry widely uses capital budgeting for selecting the projects that will add
more value to the business (Baker and English, 2011). There are various methods available under
the capital budgeting that has both advantage and disadvantage, and they have a direct impact on
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the decision making of the company. During 1972, the research paper based on the survey
conducted by Klammer and Thomas over 369 companies that are about manufacturing industry
for analyzing the use of capital budgeting in their decision making was released (Baker and
English, 2011). From the research, it was clear that most of the companies were making use of
present value for performing the analysis. There were no specific techniques indicated for the use
ut time value of money was given more importance.
There was a survey conducted by the Rosenblatt and Jucker (1979) for analyzing the use
of what are techniques used by the companies for decision making (Baker and English, 2011).
The survey was conducted between 1955 to 1978 that indicated that most of the companies are
not using the capital budgeting techniques (Aggarwal, 1980). It was surprising as most of the
esponders were indicating that they were not making use of discounting techniques for
performing the analysis. But the research published by Klammer and Thomas (1972) indicated
about the awareness about the capital budgeting and the increase in present value implementation
techniques (Baker and English, 2011). There was more debate to make any conclusion at this
point as further research and analysis were essential to draw a valid conclusion (Klammer, 1972).
The research was an ongoing process, and during 1984 there was an analysis about the
wide usage of capital budgeting. From the research, it was clear that capital budgeting was
considered as a sophisticated technique and was widely used by many business organization for
making their critical decisions (Klammer and Walker, 1984). The main reason for the increase in
the usage of capital budgeting techniques for the analysis is that with change and improvement in
the education, more executives are familiar with these techniques. These techniques provide
etter assistance to the decision making if they are no information asymmetry present in the data
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that are used by the company for performing the analysis (Meyer and Kiymaz, 2015). It is
considered as the sophisticated method, and it is the main reason for making use of them.
Accounting Rate of Return is one of the capital budgeting methods that makes use of the
net operating income that is generated by the project. Incremental income is considered, and they
are divided by the initial investment to determine the accounting rate of return. If the accounting
ate of return for the project is greater than the cost of capital, then the project can be selected. It
is easy to use, but they are not conventional to make decision making (Mbabazize and Daniel,
2014). The main reason for them not being conventional is that they do not consider the time
value of money that is critical for the analysis.
Some methods are not widely used and some techniques that are greatly used by the
usiness. Most of the decision makers are highly inclined towards the Net Present Value (NPV),
Internal Rate of Return (IRR), Profitability Index (PI) and discounted payback method. As per
the study of Gitman and Fo
ester’s (1997) most of the corporations are making use of capital
udgeting techniques to make major decisions. The research outcome of Gitman and Fo
ester’s
(1997) is in line with the research of Klammer and Thomas (1984) that most of the organizations
are widely making use of sophisticated capital budgeting techniques for decision making (Baker
and English, 2011).
Block, Stanley 1997 survey was conducted to focus on the use of capital budgeting by
small firms as every decision made by the small business will have a direct...