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SHRI RAMSWAROOP MEMORIAL GROUP

OF PROFESSIONAL COLLEGES
LUCKNOW
RESEARCH REPORT
ON
“ “RISK ANALYSIS IN CAPITAL BUDGETING”
SUBMITED IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE AWARD
OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
TO
GAUTAM BUDDHA TECHNICAL UNIVERSITY, LUCKNOW
FOR THE SESSION
20131!
UNDER GUIDANCE OF" SUBMITTED BY"
M#$ AAMIR AI%A& RAHNUMA KHAN
D'()#*+',* -. M),)/'+',* R-00 ,-$" 1212210100
SRMGPC, LUCKNOW M$B$A$ !
*2
S'+'3*'#
RISK ANALYSIS IN CAPITAL BUDGETING
CERTIFICATE
Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
ii
RISK ANALYSIS IN CAPITAL BUDGETING
DECLARATION
Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
iii
RISK ANALYSIS IN CAPITAL BUDGETING
ACKNOWLEDGEMENT
We think if any of us honestly reflects on who we are, how we got here, what we think we
might do well, and so forth, we discover a debt to others that spans written history. The work of
some unknown person makes our lives easier everyday. We believe it's appropriate to
acknowledge all of these unknown persons; but it is also necessary to acknowledge those people
we know have directly shaped our lives and our work.
First of all we would like to thank my guide Mr. M!" !#$, Faculty of Management
%epartment, &"! "M&W"''( M)M'"!* +"',( 'F ("'F)&&!'-* .'**)+)&,
*ucknow for his guidance throughout the semester.
Finally, ! would like to thank My +od, My (arents and my friends for all the support and
blessings that was re/uired for completion of this pro0ect.
RAHNUMA KHAN
R-00 N-$" 1212210100
MBA 4IV S'+$5
Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
iv
RISK ANALYSIS IN CAPITAL BUDGETING
PREFACE
"esearch "eport has been carried out to have an overview on 1"isk nalysis in .apital
2udgeting3.
The methodology used was data collection using secondary data.
&econdary data was collected from !nternet and 2ooks. (rimary %ata was collected through
survey among some company managers. The procedure adopted to select sample was simple
random sampling
The research design is analytical in nature. /uestionnaire was prepared and distributed to
!nvestors. The investor3s profile is based on the results of a /uestionnaire that the !nvestors
completed. The &ample consists of 455 respondents from various companies. The target
respondents were managers or authorities who are part of risk analysis or capital budgeting
team. The area of survey was restricted to *,.6-'W.
Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
v
RISK ANALYSIS IN CAPITAL BUDGETING
ABSTRACT
The purpose of this study is to e7amine the capital budgeting strategies that are used by !ndian
.ompanies. While the results indicated a preference for sophisticated capital budgeting
techni/ues as the primary method of analysis, the actual use of sophisticated capital budgeting
techni/ues by managers may not be as widespread as e7pected by financial theorists. lthough
it was found that certain environmental and company8specific factors influenced the level of
sophistication of capital budgeting practices used by companies. The companies e7posed to high
levels of political and financial risk tended to use sophisticated capital budgeting strategies.
.ompanies characteri9ed by high levels of financial leverage and high cost of capital
re/uirements also employed advanced capital budgeting strategies. Multinational enterprises
:M-)s; have many options available to them in terms of how they manage their foreign
subsidiaries. Traditionally, most ma0or policy decisions were made at the parent firm's head8
/uarter office while some companies had few opportunities to influence ma0or corporate
decisions. Today, more companies are using a fle7ible approach which involves setting strategic
goals at the home office and allowing local managers to implement their own specific policies.
n important /uestion in this study involved determining how effective local managers were in
implementing their capital budgeting processes.
Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
vi
RISK ANALYSIS IN CAPITAL BUDGETING
TABLE OF CONTENTS
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Department of Management, Shri Ramswaroop Group of Professional Colleges, Lucknow
vii