Abstract:
Purpose of the study
The main aim of this research is to classify the practicing of capital budgeting, risk
assessment and discount rate techniques that are presently using by public-listed firms in
Pakistan. Although the study also aims to classifying the relationship exist between the extent
of using capital budgeting techniques and financial factors that have been affecting the
selection of the different techniques.
Research method/sampling
The nature of research is explanatory which is based on quantitative data collected through a
well-structured questionnaire. The data is collected from 40 respondents among the public-
listed firms in KSE 100 Index that have been chosen as sample size from finance department
in which including financial institution, insurance sector, automobile sector, food sector and
pharmacy sector. The data was analyzed through chi square test and cross tabs with the help
of SPSS.
Findings of the research
The study revealed that majority of the large firms is moving towards the trends of using
sophisticated methods in which NPV, IRR, sensitivity analysis, scenario analysis and WACC
are the most widely adopted technique in Pakistan. Moreover, it has been also found that there
is significant relationship exit among methods and most of the financial factors that has been
selected for the study
Practical implications of the research
Based on the outcome of the study, the large firms need to give attention to apply the concepts
and methods of capital budgeting in the more applicable way and try to adopt more advanced
techniques like real options, simulation analysis and decision tree analysis.
