ROLE OF CAPITAL BUDGETING IN PROJECT

MANAGEMENT

JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MASTER OF Accounting and Finance

ARTICLE REVIEW ON THE COURSE

REVIEWED BY: - Addisu Demeke

ID.NO: -

SUMMITED TO: - Eshetu Y.

MARCH, 2021

JIMMA, ETHIOPIA

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 ACKNOWLEDGEMENT

We would like to thank Our my XXX, Mr. XXX, forgiving this chance from this we are
really grasp much knowledge’s from different literatures during the preparation of this article
review. Next, we are forwarded our thankful appreciation to our beloved family for being
beside us in all our life and preparation of this article review. Last but not least we would like
to thank our class mats specially our class members for cooperation indifferent activities
related to the class.

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 TABLE OF CONTENTS
Contents page

Summary of the article..........................................................................................................................1

Introduction...........................................................................................................................................1
Objective of the article..........................................................................................................................1
Methodology of this article...................................................................................................................2
Theoretical and empirical literature discussed in this article.................................................................2
Valid are the reason in the article..........................................................................................................2
Conclusions of the article are aligned well with the findings of the study.............................................3
Exactly does the work contributes and related to the overall topic of my course:.................................3
In my opinion the strengths of the article were..............................................................................3
Weaknesses of the article were.........................................................................................................3
Opportunity of this article................................................................................................................4

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Article title: Role Of Capital Budgeting in Project Management

Article Authors: - CS Gowtham and Magdalene Peter

Summary of the article

Capital budgeting is a step by step process that businesses use to determine the merits of an
investment project. The decision of whether to accept or deny an investment project as part
of a company's growth initiatives, involves determining the investment rate of return that
such a project will generate. However, what rate of return is deemed acceptable or
unacceptable is influenced by other factors that are specific to the company as well as the
project. For example, a social or charitable project is often not approved based on rate of
return, but more on the desire of a business to foster goodwill and contribute back to its
community. Capital budgeting is important because it creates accountability and
measurability. Generally, as part of capital budgeting, a company might assess a prospective
project's lifetime cash inflows and outflows to determine whether the potential returns that
would be generated meet a sufficient target benchmark.

Introduction

Capital budgeting is one of the most important decisions faced by the financial management
of any organization. Develop and formulate long-term strategic goals the ability to set long-
term goals is essential to the growth and prosperity of any business. The ability to
appraise/value investment projects via capital budgeting creates a framework for businesses
to plan out future long-term direction. It is a planning mechanism used by an organization to
make evaluation decisions on how to allocate resources among investment projects and
assessing the investment projects that will create benefits for periods of over one year and
that will assist the company to obtain revenues or reduce future costs.

Objective of the article

In this article authors are clearly set out specific objectives as firm using capital budgeting,
their goal is to see if there fixed income will cover itself for profit and the authors were not
clearly stated general objective as a title in the study.

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 Methodology of this article

For achieving the objective of this study and verifying the re-search hypotheses, this research
undertaken the present study is Average Rate of Return Method (ARR). Generally in this
article methodology parts of the article are stated in appropriate and suitable manner as well.

Theoretical and empirical literature discussed in this article

According to this article, Authors uses some theoretical and empirical literature reviews are
evolved from different conceptualizations and hence has been known by various names as:

Fremgen James (1973) surveyed a random sample of 250 business firms that were in the
1969 edition of Dun and Bradsheet’s Reference Book of Corporate Management.
Questionnaire were sent to companies engaged in manufacturing, retailing, mining,
transportation, land development, entertainment, public utilities and conglomerates to study
the capital budgeting models used, stages of the capital budgeting process, and the methods
used to adjust for risk. He found that firms considered the Internal Rate of Return model to
be the most important model for decision making. He also found that the majority of firms
increased their profitability requirements to adjust for risk. Yet, some technical words are
difficult to understand, the presence of limited and missed citations and limited information
on authors profiles are makes literature little and it was not well written, well organized and
are not significantly contribute to the field of study but based on its importance of this article,
theoretical as well as empirical evidences are not discussed in detail , based on its importance
for current situations, theories are not discussed in sufficient manner to show its importance
of the study.

Valid are the reason in the article

This survey is conducted to find the existing reality and validity of the article refers to the
extent of researcher’s ability to draw accurate conclusions from the research objectives.
That is, the degree of a study’s: whether the research findings accurately reflect how the
research variables are really connected to each other and most variables are really
connected within this article issues, so this article are really connected within this article
issues and it states somewhat valid reasons for study variables.

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 Conclusions of the article are aligned well with the findings of the study

Finding reflects the topics of the article with its finding because conclusions are related
with the researchers study. Authors presented the following conclusions which are related
with the researcher study variables as Capital Budgeting Introduction Capital budgeting is the
process of evaluating and selecting long-term investments that are consistent with the firm's
goal of maximizing owner wealth. A firm using capital budgeting, their goal is to see if there
fixed income will cover itself for profit. In general conclusions which are stated in this article
are well and stated in good faith of study variables but not in sufficient ways.

Exactly does the work contributes and related to the overall topic of my
course:

The course title and topic of the article reviews are aligned with each other. Title of this
article currently known more popularly in the study of sectors and has evolved different
conceptualizations concepts and hence it has been known by various names. Despite its
conceptual evolution, its existence has been prominent and it contributes to the overall
topics of this study. So, every stated variables in this article contributes a lot and it is
somewhat relates to the topic of study article.

In my opinion the strengths of the article were

The author findings were somewhat meets the objectives. The method they used to
identify helps previous and new Capital Budgeting as well as management effectiveness,
staff strength and new leadership style that are appointed for managing purposes. In
general, the results produced enabled the positive verification of formulated in the
theoretical section. The coherence of the article is well managed. The topic of this study is
global as well as national issues which need due attention and possible policy
recommendation were not clearly stated in this study.

Weaknesses of the article were

The dynamic and ever-changing external and eternal environment factors limits to trust on
the already identified problems of the study. Weaknesses of the article are that there is lack
of independent hypothesis or practical experiment made on an organizational study area. The

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topic of this study is global as well as national issues which need due attention and possible
policy recommendation were not properly proposed in this article. Generally it has lack of
some research format and others errors.

Opportunity of this article

Further study can be conducted in the future in this field of study.

Thereat of this article - The dynamic and ever-changing external and eternal
environment factors limits to trust on the already identified theoretical and empirical problem
viewed in this article.

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 References

Batra, R., & Verma, S. (2014). An empirical insight into different stages of capital budgeting.
Global Business Review, 15(2), 339-362.

Kanniga E., Sundararajan M., Kanembedded control of sub cyclic Ac chopperwith high
speed and low switching losses, Advanced Materials Research, v- 717, i-, pp-579-584,
2013.

Vijayaragavan S.P., Karthik B., Kiran T.V.U., Sundar Raj M., Robotic surveillance for
patient care in hospitals, Middle - East Journal of Scientific Research, v-16, i-12, pp-
1820-1824, 2013.

Vijayaragavan S.P., Karthik B., Kiran Kumar T.V.U., Sundar Raj M., Analysis of chaotic
DC-DC converter using wavelet transform, Middle – East Journal of Scientific
Research, v- 6, i-12, pp-1813- 1819, 2013.