Abstract:
In today’s highly competitive business environment long-term capital investments have
become a critical issue. Organizations are still making efforts to understand suitable capital
budgeting techniques. The importance has been given to capital investment for the creation of
shareholder wealth for individual firms. It is vital to investigate the practices used to evaluate
the projects. The sample is selected from manufacturing; pharmaceuticals and chemicals, and
textile sectors. The study is exploratory nature. Capital budgeting techniques i.e., Pay Back
Period (PBP); Accounting Rate of Return (ARR); Net Present Value (NPV); Internal Rate of
Return (IRR) and Profitability Index (PI) methods have been used as the techniques of capital
budgeting. Finally, the results show that NPV method is the most dominant capital budgeting
technique according to the perception of executives of all sectors. It has been found that the
executives mostly prefer NPV and IRR methods of capital budgeting from the companies of
the manufacturing, pharmaceutical and chemical sectors, where as the executives of the
textile sector prefer the NPV method for evaluating capital budgeting. Further, this study
attempts to give a sector wise solution with the help of a model for capital budgeting
practices.
