CAPITAL BUDGETING AND FINANCIAL MANAGEMENT IN INVESTMENT DECISIONS: AN ILLUSTRATIVE STUDY

Effective project analysis is essential to the optimization of creative, strategic, and thoughtful financial management investment decision-making. Capital budgeting techniques-a process in an enterprise's long- term investment planning, lie at the core of such financial decision analysis. The purpose of this study is to examine techniques in conducting investment decision analysis through capital budgeting. In particular, the illustrative methods for comparison and choice of decision criteria used in the analysis include: (1) Accrual rate of return (AROR), (2) Benefit-Cost (B-C) ratio method, (3) payback period, (4) Net present value (NPV), (5) Internal Rate of Return (IRR), and (6) sensitivity analysis methods. Study evidence found an inverse relationship between NPV yields from the discounted cash value evaluations. To the extent that, lower interest rates provided higher resultant discounted cash values for NPV derivations. While higher interest rates gave lower, reverse NPV yields. Thus, highlighting the preeminence and significance of interest rates in the cost of capital determination for long-term project profitability as well as sustainability. Study findings, policy implications and limitations for investment decisions are finally highlighted.