The following is an extract from R.H. Pike (1989) 'Do Sophisticated Capital Budgeting Approaches Improve Investment Decision Making Effectiveness?' The Engineering Economist , 34(2), 149-61
Evaluation of control methods: trend analysis in 100 UK large firms.
|
Technique
|
1986
|
% usage 1981
|
1985
|
|
Payback
|
92
|
81
|
73
|
|
Average accounting rate of return
|
56
|
49
|
51
|
|
Internal rate of return
|
75
|
57
|
44
|
|
Net present value
|
68
|
39
|
32
|
The above trends suggest an increasing use of sophisticated techniques linked with an increase in payback.
You are required to explain and justify this trend, and outline its implications.