Capital Budgeting in West European Companies

Introduction Since 1951, the subject of capital budgeting has become deeply entrenched in the literature of financial management. Since Joel Dean's pioneering text (1951) many articles and books devoted to theoretical conceptualisation and empirical research have been published. In general, along with the growth in the literature of capital budgeting, it appears that usage of more sophisticated capital budgeting techniques has increased. Discounted cash flow (DCF) techniques, in particular, seem to be used more and more by large companies especially. This observation might be expected in view of the increasing sophistication in managerial analysis, computers, application of management science and quantitative methods, and the increasing complexity of worldwide business operations in general. Business firms in the US, Europe, and elsewhere, continue to search for those analytical techniques which will lead to an increase in shareholder wealth or maximum profits.