Capital Budgeting Valuation: Financial Analysis For Today'S Investment Projects

With the collapse of the economy and financial systems, many institutions are reevaluating what they are willing to spend money on. Project valuation is key to both cost effectiveness measures and shareholder value.

The purpose of this book is to provide a comprehensive examination of critical capital budgeting topics. Coverage extends from discussing basic concepts, principles, and techniques to their application to increasingly complex, real-world situations. Throughout, the book emphasizes how financially sound capital budgeting facilitates the process of value creation and discusses why various theories make sense and how firms can use them to solve problems and create wealth.

• Offers a strategic focus on the application of various techniques and approaches related to a firm's overall strategy
• Provides coverage of international topics based on the premise that managers should view business from a global perspective
• Emphasizes the importance of using real options

Comprised of contributed chapters from both experienced professionals and academics, Capital Budgeting Valuation offers a variety of perspectives and a rich interplay of ideas related to this important financial discipline.

H. Kent Baker, PhD, CFA, CMA, is University Professor of Finance and Kogod Research Professor at the Kogod School of Business at American University, Washington, D.C. He has published extensively in leading academic and professional finance journals including the Journal of Finance, Journal of Financial and Quantitative Analysis, Financial Management, Financial Analysts Journal, and Journal of Portfolio Management. Recognized as one of the most prolific authors in finance during the past fifty years, Professor Baker has consulting and training experience with more than 100 organizations and has been listed in fifteen biographies.

Philip English is an Assistant Professor of Finance and Real Estate at the Kogod School of Business, American University. He currently serves as Director of the Master of Science in Finance and Master of Science in Real Estate programs. Before pursuing a doctorate, English worked as the primary financial officer and director of product development for Campbell Classics, a Virginia-based manufacturing firm. Professor English's research interests focus on the role of the legal environment in emerging markets, corporate governance, and mutual fund regulation. He has published in the Journal of Financial Research, Journal of Corporate Finance, Journal of Law and Economics, and Emerging Markets Review.

1 Capital Budgeting Valuation: An Overview (H. Kent Baker and Philip English).

Part I Foundation and Key Concepts.

2 Corporate Strategy and Investment Decisions (Daniel Ferreira).

3 Corporate Governance and Investment Decisions (Fodil Adjaoud, Dorra Charfi, and Lamia Chourou).

Part II Capital Investment Choice.

4 Measuring Investment Value: Free Cash Flow, Net Present Value, and Economic Value Added (Tom Arnold and Terry Nixon.

5 Alternative Methods of Evaluating Capital Investments (Tom Arnold and Terry Nixon).

6 Capital Rationing for Capital Budgeting (Alexander Brüggen).

7 Analyzing Foreign Investments (Wim Westerman and John Henry Hall).

8 Post-Completion Auditing of Capital Investments (Jari Hiukku).

9 Capital Budgeting Techniques in Practice: U.S. Survey Evidence (Tarun K. Mukherjee and Naseem M. Al Rahahleh).

Part III Project Cash Flows and Inflation.

10 Estimating Project Cash Flows (Kyle Meyer and Halil Kiymaz).

11 Capital Budgeting and Inflation (Ignacio Velez-Pareja and Joseph Tham).

Part IV Risk and Investment Choice.

12 Basic Risk Adjustment Techniques in Capital Budgeting (John H. Hall and Wim Westerman).

13 Capital Budgeting with Political/Country Risk (Yacine Belghitar and Ephraim Clark).

14 Risk Management in Project Finance (Stefano Gatti and Stefano Casell).

15 Risk Simulation Concepts and Methods (Tom Arnold and David North).

Part V Real Options and Project Analysis.

16 Real Options Analysis: An Introduction (Tom Arnold and Bonnie Buchanan).

17 Applications of Real Options Analysis (Tom Arnold and Bonnie Buchanan).

Part VI Estimating the Project Cost of Capital.

18 Cost of Capital – An Introduction (Octavian Ionici, Kenneth Small and Frank D'Souza).

19 Using the Capital Asset Pricing Model and Arbitrage Pricing Theory in Capital Budgeting (S. David Young and Samir Saadi).

20 Financing Mix and Project Valuation: Alternative Methods and Possible Adjustments (Alex Pierru and Denis Babusiaux).

Part VII Special Topics.

21 Capital Budgeting for Government Entities (Davina Jacobs).

22 Decision Making Using Behavioral Finance for Capital Budgeting (Yuri Biondi and Guiseppe Marzo).

23 Merger and Acquisition Pricing: The Valuation of Synergy (Ranier Lenz).

24 Multicriteria Analysis for Capital Budgeting (Fernando Fernholz).

Answers to End-of-Chapter Discussion Questions.

Index.