The Shaky Foundations of Capital Budgeting

Abstract

The author discusses the wide array of forecasts that must be made as the basis for estimates of prospective outlays and incomes required as inputs to capital budgeting evaluations. The expected accuracy of such forecasts is then reviewed on the basis of available empirical findings. Because of the serious limitations suggested, the author reviews some alternative bases for major capital decisions emerging from exploratory studies of the determinants of actual decisions.

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