DefinePK

Abstract

An assortment of speculation examination/capital planning systems is talked about as a basicsegment of standard and prominently utilized course readings on Financial Management andCorporate Finance. Every procedure has a few points of interest and deficiencies which a client mustknow about other than knowing which method would be the right instrument to use for taking a choicein a specific circumstance. That's why the aim of the present study is to determine the review and use ofcapital budgeting investment decision in Pakistan in 2017. As there is 427 manufacturing companieslisted on Pakistan stock exchange categorized into 26 sectors from which five sectors [Chemical,automobiles assemblers, food & personal care product, sugar & allied industry and textile(weaving)]have selected as a sample by applying purposive sampling technique, which contains 90manufacturing companies. The nature of study based on quantitative and qualitative both. Primarydata was collected with the help of adopted questionnaire containing sixteen items.There are six typesof capital budgeting techniques like internal rate of return(IRR), payback period(PBP), profitabilityindex(PI), accounting rate of return(ARR), net present value(NPV) and modified internal rate ofreturn(MIRR)which are considered in investment decision but four techniques (net present value(NPV), internal rate of return (IRR), profitability index (PI), and payback period (PBP) ) are morespecifically be used in every organization. That's why the current study considered these fourtechniques to evaluate investment projects. The reliability calculated by the help of Cronbach's Alphaand One-Sample T-Test used to calculate the results of this study statically to prove the significancelevel (P-value) of Net Present Value, Internal Rate of Return, Profitability Index and Payback Period.The results found that net present value (NPV) is most commonly used by the manufacturingcompanies in choosing amongst investment projects, while on the other side profitability index (PI)has least used in investment decisions by the firms in Pakistan according to the statistical results.It is,further, revealed that most of the firms used only one evaluation technique among these favoredtechniques. Moreover, it is found that project definition is the most important and critical in the capitalbudgeting process for service organizations.