CAPITAL BUDGETING IN THE PRIVATE SECTOR (A CASE STUDY OF THE NIGERIAN BREWERIES)


CAPITAL BUDGETING IN THE PRIVATE SECTOR (A CASE STUDY OF THE NIGERIAN BREWERIES)     

ABSTRACT 

Capital budgeting involve basically the estimation of the cash flow, estimation of the expected cash return and application of evaluation techniques in making investment decision.

This study looked into the extent to which the Nigerian breweries do carry out proper evaluation of capital project before making their investment decision as well as the extent in which other factors are consider in the decision process.

The study wills assertion the extent to which capital budgeting evaluation techniques are used by the Nigerian breweries in evaluation the capital budgeted projects. And consider whether well-evaluated project will yield adequate return for investors as well as the other factor, which influence the selection of the project to be invested in. 

In arriving at my conclusion, interview were conducted and statistical test such as the chi-square were used in analyzing data collected at the course of the study.

Result of the study show that the evaluation of the capital project by the management of the Nigerian breweries is not normally carried out effectively before making their investment decision and that a well evaluated project will normally yield an adequate return on investment.

Based on the findings, some recommendation has been put forward for consideration in chapter five.

TABLE OF CONTENT

Title page

Approval page 

Dedication

Acknowledgement

Abstract

Table of content

CHAPTER ONE:

1.1 Introductions 

1.2 Statement of the problem 

1.3 Objective of study

1.4 Significance of study

1.5 Statement of the hypothesis 

1.6 Scope of the study

1.8 Definitions of terms 

CHAPTER TWO:

2.0 Review of the related literature 

2.1 Meaning of capital budgeting decision 

2.2 Importance of capital budgeting decision 

2.3 Types pf capital budgeting decision 

2.4 Problems 

2.5 Analysis of capital project 

2.6 Deterring the cash flow 

2.7 Techniques used in capital budgeting decision 

2.7.1 Payback method 

2.7.2 Net present value 

2.7.3 Internal rate of return 

2.7.4 Accounting rate of return 

2.8 Ranking of investment proposal 

CHAPTER THREE 

3.1 Research design and methodology 

3.2 Source of data 

3.3 Primary 

3.4 Secondary data 

3.5 Sample used 

3.6 Method of investigation 

CHAPTER FOUR 

4.1 Data analysis and interpretation 

4.2 Data presentation and analysis 

4.3 Test of hypothesis 

CHAPTER FIVE 

SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATION 

5.1 Summary of the findings 

5.2 Conclusion 

5.3 Recommendation 

BIBLIOGRAPHY

APPENDIX / QUESTIONNAIRE

CHAPTER ONE

INTRODUCTION 

Every business firm normally will like to know how it perform over a period of time thus leading to a preparation of profit and loss statement. They also ask about their position at a particular point in time, which lead then to proper balance sheet. Finally they will like to know where they are leading which led to the preparation of budget.

Budgeting is a term that used by long man. Long confused budgeting with planning. a beget is part of a plan. A plan can be expressed in monetary and non-monetary terms. Any plan that is qualified in a monetary term is a budget . a bugeti therefore can be succinctly define as a statement of intention qualified in monetary terms.

In budgeting there are types of budget prepared by frims . such budget include capital budget, sale budget, cash budget and so on. The process of preparing capital budget is called budgeting. Capital budget are long-term budget made for acquisition and expansion of fixed asset. Many firms prepares capital budget today. It was originated in the united state of America (U.S.A) in America it was applied by all firm before the second war. After the second war, many firm saw the need to plan for capital expenditure, hence it is prevalence today. 

The Nigerian brewery limited and other beverage are not left out in the train of firm of firm that prepare budget for its capital expenditure. This is however not easy as it is fought with a lot of problem.

1.1 STATEMENT OF PROBLEM 

The main purpose of setting up a private firm is o archive enough sale revenue that will cover the fixed and the variable cost as well as live some profit top justify its existence. Nigerian brewery limited being a private enterprise involves a brewery beer has the objective of making big huge profit. Brewery all over Nigeria witness heavy rerun on their investment due to the expert of their product to neighboring African countries as well as the high consumption rate of beer in the country. This was before the year 1982.

The introduction of many stringent economic measure after the year 1982 aim at revamping the nations live economic brought with many problem with which the brewery industries is not left out. In the order to produce, firm in the brewery industry (* including the Nigerian brewery limited) acquire fixed asset as well as raw material. This acquisition is abased on the expected demand. The demand for beer cannot now be fairly estimated because of the general rises in the price. General rise in the price of beer has made the consumers to shift their demand to other goods as necessity thud decreasing the demand for beer. The uncertainty surrounding the continuance the rate at which the demand for beer decrease has become of the problem encountered by the capital budget especially by the Nigerian breweries limited since the capacity of production is always affected by change in the demand of the product. 

Apart form the capital budgeting problem caused by the uncertainty in the change in the demand, there is also a problem of tariff and import restriction on the importation of fixed asset and the spar parts. The singular problem has help in no small measure in fuelling the height of the problem encountered by the firm. It has also made from like the Nigerian breweries look for alternative way of obtaining fixed asset necessary for its production and operation. Even when this fixed asset are source from the , it often increased the price for them as a result of the import tariff restriction,. The uncertainty surrounding this has made a ca0tial budget problem.

Increase in price for fixed asset as a result for import restriction and the small nature of the financial capacity had made firm like the Nigerian breweries limited t rank the project hey wish to embark on. . In encountered in the selection of the project of the human problem in the organization, which is to be embark upon. There is always problem of appropriate selection that will be peculiar to a given project. As encountered in the project is the selection of human factor, which is fidelity of the state of mind of the individual in charge of the capital budgeting. Because of the small nature of the financial ability. Nigerian brewery limited took to external source of financing in its capital project. The external source of financing include the commercial bank, trade creditors. And some financial institution. Bank and other financial institution charges interest on the money that they lend out. Interest changes fluctuated with the changes in the economic settings. Due to the dynamic nature of he economy with consequent affect on the interest rate, it is problem making cost benefit analysis necessary in the capital budgeting.

Even when the able problem are solved to a great extent their remain the problem obtaining foreign exchange necessary to remit the exporters change rate. The rate is never stable. The uncertainty included in this makes a problem for capital budgeting.

PURPOSE OF THE STUDY 

The purpose of the study were to find out the following 

1. Ascertain the extent to which capital evaluation techniques are used by the Nigerian breweries management in evaluating their projects

2. Ascertain whether well evaluated project will yield the adequate return for the investor 

3. Determine the other factor, which influence the selecting of project to be invested in.

4. The capacity of the budgeting process in the Nigerian brewery limited 

SIGNIFICANCE OF THE STUDY 

A lot of factor makes capital budgeting very important in the productive and the commercial fair of any economy. This factor include lose of flexibility. Some of the information on this were taken form essential of management finance by J.C Wilson and E.A Brighton. After the commitment of fund to project, the relationship between asset expansion and sale proper phasing the availability for the capital asset and the quality of the asset purchased, satanically expenditure on which fund are not automatically available and the failure of a firm as a result of too little equipment. 

Capital budget is an important aspect of strategic decision involving the financial management in the purchase of the fixed asset, firms commit large amount of capital.. The result of his capital commitment continue over a long time with subsequent lose of flexibility in decision-making. Apart from lose of flexibility in the long age to event, expansion of the fixed asset is always related to the future sale and future sale are also forecast. Acquisition of the an asset with a five year economic live span means a forecast of sale to be made over the same period of time. Therefore, failure to forecast accurately result in the under-investment of the fixed asset.

The outcome of the research work will be significant to the management of the Nigerian breweries limited who is faced with capital budgeting decision problem.

Furthermore, it will be significant to the investor who which to invest in capital project.

Finally it will be equally be important to other researchers and scholars who may wish to carry out further research on the subject matter or on the related topic.

STATEMENT OF HYPOTHESIS 

Ho: that evaluation techniques used by the company management is adequate for good decision-making 

Hi: that the evaluation techniques used by the company are not adequate fir good decision making 

Ho: the evaluation the capital project in not important in the Nigerian breweries 

Hi: the evaluation of a capital project is not important in the Nigerian breweries.

SCOPE OF THE STUDY 

The study will examine the capital budgeting techniques of the Nigerian breweries and will be able to established if there is any relationship between the budgeting techniques adopted by the firm with stated in the theory 

LIMITATION OF THE STUDY 

Limitation abounds in this type of study. So far the limitation encountered are as follows 

Access to the documents: experience has shown that apart from carrying out academic research in firm, it is also difficult to gain access to the document. This is because that firm has certain secrets commits to written which they will not like any other person to see. This was considered impediment to this study 

Time constraint: unlimited study on defilement areas for interest would have been conducted throughout the world if there were enough time for that. Time constraint was the most inhibiting factor which otherwise would have enable and extensive pursuit of knowledge in this area of interest in capital budgeting 

Insufficient information: 

The researcher conducted interview in attempt to try to see some of the document. Document wanted were not obtained because of the interviewer fear for letting out the companies secret. Some oral information was difficult to get.

DEFINITION OF TERM 

Capital budgeting: This is a long-term plan made for expenditure necessary to buy fixed asset for the production of the good and service 

Finance: This is the term used to donate the acquisition and expending of fund to meet an economic unit objective 

Cash flow: This simply means a flow of cash into a firm such as revenue from sale 

Capital asset: This is asset of long-term nature used in the production of goods

Capital rationing: This is the allocation of scarce capital resources among competing economically desirable projects, which cannot be carried out to capital or other constraint 

Ranking: This is the arranging of project in the order of their viability with reference to their evaluation result.

.

CAPITAL BUDGETING IN THE PRIVATE SECTOR (A CASE STUDY OF THE NIGERIAN BREWERIES)



TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.ORG

Researchwap.org is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.org guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.org is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.org" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.