An evaluation of the capital budgeting process for a multinational firm.

Abstract

For the purposes of this study I have adopted a case study approach, based on a Multinational company in the UK, with business units geographically spread throughout the world, including South Africa. I intend to provide a detailed analysis of all aspects of the Capital Budgeting process. The dissertation will cover the follow ing areas : • The capital appraisal techniques used to evaluate capital projects. • The determination of a cost of capital. • Adjustments to the cost of capital in a multinational context. The approach in this study will be to divide Capital Budgeting into the three specific areas as detailed above, discuss the theory associated with the subject, analyse empirical research on the topic and critically evaluate the findings of the practices at the Multinational chosen for this study. Due to confidentiality reasons I shall refer to the company as "PLC" for the purposes of this study. 1.3. Objectives of the Study The objective of the study is to evaluate the capital investment appraisal process of "PLC", in the light of theoretical and empirical literature on the subject, leading either to suggestions for improvement or acknowledging the merit of the current practice. It is expected that "PLC" utilises sophisticated methods for investment appraisal but does allow room for improvement.