Rationalizing Capital Budget Decisions Using Net Present Value (NPV): A Case Study
Keywords:
Capital Budgeting, Investment Projects, Net Present Value, Capital Budget DecisionsAbstract
Capital budget decisions related to investment projects are critical strategic decisions that require careful analysis and thought. The reason for this is due to the characteristics of long-term investment projects that are exposed to risks and uncertainty. The net present value (NPV) model is a tool for evaluating investments in light of uncertainties. This study aims to highlight the importance and effectiveness of the net present value criterion in evaluating future investment projects and the comparison between alternatives. In addition, the paper aims to explore how to apply this criterion to investment projects, as the Karbala International Investment Group Company intends to compare between three investment projects and choose the most appropriate project for its implementation through the use of the net present value (NPV) method because of the advantages and most important of this method. It is used in conditions of risk and uncertainty and takes into consideration the time value of money through the use of the discounted cash flow rate.
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