Capital Budgeting Processes and Wealth Maximization Objective: Implications for Firms in Nigeria

Abstract

This paper examined how capital budgeting processes result in the wealth maximization objective of firms in Nigeria. Data were obtained from both primary and secondary sources using the explorative research design. The findings revealed that proper identification and selection of projects becomes necessary, using capital budgeting techniques and processes and adopting those projects that would maximize the wealth of the owners through value addition to the capital of the firms. It concluded that adopting the necessary techniques and implementing them implies using capital budget processes to actualize the objectives of the firms. The paper contributes to the literature on capital budgeting as a multi-faceted process aimed at making screening and preference decisions by management, on which long-term project should be embarked on. It recommended that firms in Nigeria should entrench the capital budget processes in the firm and be seen to follow it as aproved and authorized by the board. This would result in better performances by the firms in Nigeria.

Keywords: Capital Budgeting Processes, Net Present Value, Wealth Maximization, Investment Appraisal.