CAPITAL BUDGETING PRACTICES: A STUDY OF ETHIOPIAN CONSTRUCTION DESIGN AND SUPERVISION WORKS CORPORATION

Abstract

The implementation of sound capital budgeting practices is one of the most important factors for the success of a business. The purpose of this study is to assess and describe the results of the case study conducted on the capital budgeting practices of Ethiopian Construction Design and Supervision Works Corporation. The capital budgeting practices of the corporation was examined using an analytical frame work of likert scale measurements. Case study design with mixed research approach is employed. Research evidence was gathered distributing questionnaires to managers and experts who involved in capital budgeting practices of the corporation and Interview and document reviews were conducted to get sufficient evidence in evaluating the capital budgeting practices. The result show that capital budgeting practice of the corporation is in line with the theory of capital budgeting and empirical evidences. Accordingly, the corporation uses profitability index technique which applies discounting cash flow method. The corporation’s capital budgeting task organization which the study tried to assess from planning, evaluation, investment selection, implementation and post investment evaluation work processes are found to be in line with the theory and the practices addressed in the literature review section of the study. The study found that shortage of skilled man power to be a challenge for the capital budget practices of the corporation. Since a case study on a single unit is conducted, universal generalization of the findings cannot be claimed.