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AbstractTitle
: The importance of the Payback method in Capital budgeting decision.
Authors
:Alaba Femi,AwomeweandOludele Olawale,Ogundele
Supervisor
:Anders Hederstierna
Department:
School of Management, Blekinge Institute of Technology
Course
:Master’s thesis in business administration, 15 credits (ECTS).
Background and Problem Discussion
:The capital budgeting decision has been a verytypical issue in the sustenance of a company. Several companies have lost their identity orliquidated due to wrong capital budgeting decision they made at one particular time or theother. Based on these prevalent problems in industries and the effect of globalisation onindustries, it is important to use effective method to analyse investment before decision ismade. Capital budgeting is extremely important because the decision made involve thedirection and opportunity for future growth of the organisation.One of the traditional methodscommonly used for capital investment appraisal by some organizations is the payback method, although this method has been criticized by academicians that it does not include thefuture cash flow and do not measure profitability. The wide acceptance of this method bypracticing managers, has called for investigation as why is the method is still popularly usedin organizations. In this thesis work, we will examine the reasons major decision makers inorganizations still use this method despite its critics’ objections. Could the reason be traced to
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