Capital Budgeting Under Conditions of Uncertainty (Nijenrode Studies in Business, 5)

The business environment, particularly after the continuing oil crises of the seventies, can be characterized as evolving rapidly in complex and often unpre­ dictable ways. Such things as high interest and inflation rates, fluctuating ex­ change rates, volatile commodity markets, and increasing political turmoil have led to a situation in which explicit consideration of environmental dynamics is becoming much more important for successful business planning than was true in the past. Companies are finding that it is no longer possible to conduct "busi­ ness as usual" under these changing circumstances. Rather, decision makers are having to be more cognizant of the many sources of uncertainty that could have serious impacts on the continued prosperity of the firm, as well as of actions that can be taken so that the company can thrive in spite of these greater uncertainties. Businesses have responded to these challenges by giving more thorough con­ sideration to strategic issues. Whereas in the past the steady progression of mar­ kets and technology was taken for granted, the uncertainties associated with increased worldwide competition, as well as with other exogenous factors, have vii viii INTRODUCTION forced companies to think more about flexibility. This involves not only how best to exploit profitable current options, but also how to position themselves at present to be able to respond appropriately to threats and opportunities as they arise in the future. Unfortunately, in this redirection of outlook, the fmance profession has not kept pace. Front Matter....Pages i-xii Front Matter....Pages 1-1 Investment Decisions In The Electric Industry: The Spanish Case ....Pages 3-20 The Influence of Increased Environmental Turbulence on Corporate Investment and Financial Planning....Pages 21-37 The Influence of Tax Incentives on Capital Budgeting Decisions Under Uncertainty....Pages 38-59 Front Matter....Pages 61-61 The Impact of Stochastic Project Lives on Capital Budgeting Decisions....Pages 63-80 Capital Budgeting Under Qualitative Data Information....Pages 81-117 Evaluating International Projects: An Adjusted Present Value Approach ....Pages 118-137 Critical Assumptions in Evaluating Foreign Investment Projects....Pages 138-152 Front Matter....Pages 153-153 Multicriteria Approaches to Decision Modeling....Pages 155-173 Flexibility of Corporate Planning Models in the Case of Changing Objectives....Pages 174-187 Interactive Multiple Goal Programming as an Aid for Capital Budgeting and Financial Planning with Multiple Goals....Pages 188-212 Capital Rationing Methods....Pages 213-235 Epilogue....Pages 237-238