OVERVIEW OF CRITICAL DRAWBACKS AND REFLECTIONS IN CAPITAL BUDGETING PRACTICAL IMPLEMENTATION WITHIN NET PRESENT VALUE AND ASSET PRICING MODELS

Investment analysis is extensively taught in universities and/or business schools all over the world. Moreover, it constitutes a distinctive background in skilled practitioners/consultants know-how when facing financial appraisal of long-term economic decisions. As well-known, currently the most academically preferred theoretical method for capital budgeting analysis considers the Net Present Value (NPV) framework. Nevertheless, despite an elegant form and an undeniable technical allure in its Capital Asset Pricing Model (CAPM) version, several critical issues are to be pointed out in its practical implementations. Deriving uncertainties are direct consequences of the nature and the quantity of underlying implicit assumptions. This holds true for larger companies as well as (and probably even more) for small and medium enterprises (SMEs). Without any pretension to be exhaustive, in the present work the most relevant implementation drawbacks are highlighted in the different practical cases with the aim to furnish a primer contri¬bution for all those engaging in the art of investment decisions.