People aspects of capital investment decision making

People aspects of capital investment decision making Essay example
Finance & Accounting
Pages 12 (3012 words)
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STRATEGIC INVESTMENT DECISIONS INTRODUCTION Primary objective of the firm is to maximize value of the firm or more defined to state would be enlightened value maximization as titled in the research of Jensen (2001). Enlightened value maximization is aimed not only to benefit the shareholders that claim only financial benefit but also to maximize value for entire stakeholders of internal and external domain.


Though these techniques have successfully gained popularity as deciding tool, however, influence from the human element on decision making still maintains its dominance (paper). Managers of the firm themselves receive impact from their traits leading to influenced preferences in making decision. Among many reasons that advocate the acceptance of human element weight in investment decision, it is also for the fact that capital budgeting techniques has some unanswered queries. For instance, subjectivity of the discount rate used to discount the cash flows. It further states that the outcome of decisions based on capital budgeting techniques does not facilitate learning function as each situation is considered different. Successes or failure of decision from the usage of these techniques are also attributed to manager; and it is a manager who receives promotion (demotion) on success (failure) of project and not the techniques. Also these techniques are not easy to employee and are considered as complex procedures. ...
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