time period. Second, the process must provide management with a means of selecting between alternatives. It is essential for management to have an effective and an efficient means of selecting between alternative investment proposals for two reasons. The first reason is that capital is scarce in most 4organizations. Scarcity requires an effective decision process for the rationing of available capital (Taggart, 1987). The second reason is that most corporate investment decisions are time sensitive (Thompson, 1987). To maintain timeliness in organizational activities also requires an efficient decision process. The capital budgeting process, if used effectively, provides for both the selection among alternatives, and the maintenance of timeliness in the capital resource allocation process.
There are a number of methods by which the capital budgeting concept may be applied. All of the methods, however, must provide some basis for the consideration of two significant factors. These two factors are
...