METHODS OF CREATING THE CAPITAL BUDGETING OF ENTERPRISES (FOR THE EXAMPLE OF EUROPEAN COUNTRIES)
Keywords:
capital budgeting, internal rate of return (IRR), net present value (NPV), undiscounted payback period (PP), discounted cash flow (DCF), rate of return (ARR), return on investment (ROI).Abstract
This article discusses the methods of capital budgeting in the assessment of investment projects of enterprises operating in European countries, in particular Slovakia. Based on the scientific research of economists, analyzing the methods used by enterprises in capital budgeting, the specific features of each method were studied and the possibilities of using these methods in practice were revealed. For some companies operating in Slovakia, capital investment is important to create shareholder wealth. Today, it is very important to study the practices used in project evaluation. Internal rate of return (IRR) and net present value (NPV) have long been measures of corporate capital budgeting recognized by corporate management and finance theorists, respectively. Although corporate management prefers the relevance of income-based capital budgeting methods such as IRR, some financial theorists based on economic theory favor the NPV method.
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