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Use of Capital Budgeting Techniques and an Analytic Approach to Capital Investment Decisions in Canadian Municipal Governments
Author(s) -
Lilian Chan YeeChing
Publication year - 2004
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.0275-1100.2004.02402003.x
Subject(s) - capital budgeting , capital (architecture) , discounted cash flow , business , cash flow , finance , financial capital , investment (military) , payback period , economic capital , analytic hierarchy process , economics , microeconomics , production (economics) , archaeology , mathematical economics , project appraisal , politics , political science , law , history , profit (economics)
Capital budgeting techniques are useful tools to municipal administrators in managing organizational resources. A survey of capital budgeting practices of Canadian municipal governments reveals that a minority used capital budgeting techniques; payback period dominates over discounted cash flow analysis in evaluating capital investments; and pitfalls are common in its application. More specifically, there is an emphasis of quantitative/financial items over qualitative/intangible factors. In this study, the analytic hierarchy process, a multi‐attribute decision model that accounts for both tangibles and intangibles, is presented as a tool for capital budgeting decisions such that resource allocation becomes more effective in municipal governments.