TABLE OF CONTENTS
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
1.2
STATEMENT
OF THE PROBLEM
1.3 OBJECTIVES
OF THE STUDY
1.4 RESEARCH
QUESTION
1.5 RESEARCH
HYPOTHESIS:
1.6 SIGNIFICANCE
OF THE STUDY
1.7 SCOPE OF
THE STUDY
1.8 OPERATIONAL
DEFINITION OF TERMS
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 INTRODUCTION:
2.2 THEORETICAL FRAMEWORK
2.3 CURRENT LITERATURE BASED ON THE VARIABLES
2.4 SUMMARY
OF THE LITERATURE REVIEW
CHAPTER THREE
3.0 INTRODUCTION:
3.2 RESEARCH
DESIGN
3.2 AREA OF
THE STUDY
3.3 POPULATION OF THE STUDY
3.4 SAMPLE
AND SAMPLING TECHNIQUE
3.5 INSTRUMENT
FOR DATA COLLECTION
3.6 VALIDATION
OF INSTRUMENT
3.7 DISTRIBUTION
AND RETRIEVAL OF INSTRUMENT
3.8 METHOD OF
DATA ANALYSIS
CHAPTER FOUR
4.1 DATA
PRESENTATION AND DISCUSSION OF THE FINDINGS
CHAPTER
FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF
THE FINDINGS
5.2 CONCLUSION
5.3 RECOMMENDATIONS
5.4 LIMITATION OF STUDY
5.5 SUGGESTION FOR FURTHER RESEARCH
REFERENCES
APPENDIX A
APPENDIX A
APPENDIX C
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Every
business firm normally will like to know how it perform over a period of time
this leading to a preparation of profit and loss statement. They also ask about
their position at a particular point in time, which lead them to the
preparation of budget. A budget can be seen as a document or financial document
used to project future income and expenses. In budgeting there are types of
budget prepared by the firms, such as capital budget, sales budget and 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 states of America (U.S.A).
In America
it was applied by all firms before the second world war. After the second World
War many firm saw the need to plan for
capital expenditure, hence it is prevalence today. The Nigeria brewery limited and other
beverage are not left out in the train
of firm that prepare budget for its capital expenditure. The process of capital
budgeting is vital to any responsible, well managed business. if that business
is public and owned by public shareholders, the budgeting process becomes more
crucial, since shareholders can hold management accountable for accepting
unprofitable projects that can have the effect of destroying shareholder value.
The decision of whether to accept or deny an investment project as part of a company’s
growth initiatives, involves determining the investment rate of return that
such a project will generate. Capital budgeting is also vital to a business
because it creates a structured step by step process that enables a company to
develop and formulate long-term strategic goals, seek out new investment
projects, estimate and forecast future cash flows, facilitate the transfer of
information and creation of decision. Capital budget however is not easy as it
is fought with a lot of problems.
1.2 STATEMENT
OF THE PROBLEM
The main
purpose of setting up a private firm is to achieve enough sale revenue that
will cover the fixed and the variable cost as well as live some profit to
justify its existence. The introduction of many economic measures after the
year 1982 aim at revamping the nations economic comes with many problem with
which the brewery industries are not left out.
1. The
problem of change in the demand of beer.
In order to
produce, firms in the brewery industry including (The Nigeria brewery limited)
acquire fixed assets as well as raw material. This acquisition is based on the
expected demand. The demand of beer can not now be fairly estimated because of
the general rises in the price. General rise in the price of beer has made the
customers to shift their demand to other goods. These bring about decrease in
the demand for beer. The uncertainty surrounding the continuance rate at which
the demand of beer decrease has become of the problem encountered by the
capital budget especially by the Nigeria breweries limited since the
capacity of the production is always affected by the change in the demand of
product.
2
The problem
of tariff and import restriction on the importation of fixed asset and the
spare parts.
It
has made the firm like the Nigeria
brewery limited look of alternative way of obtaining fixed asset necessary for
its production and operation. It often increased the price for them as a result
of the import tariff restriction. The uncertain surrounding this has made
capital budget a problem.
3. The problem of appropriate selection of
human factory which is the fidelity of the capital budgeting
4 The problem encountered in the external
source of financing in its capital project.
The
external source of financing included the commercial banks, trade creditors and some financial institution.
Banks and other financial institutions charges interest on the money that they
lend out, interest charges fluctuated with the changes in economic setting. Due
to the dynamic nature of the economic with consequent effect on the interest
rate, it is problem making cost benefit analysis, necessary in the capital budgeting.
The rate is never stable. The uncertainty include in this makes a problem for
capital budgeting.
5. Problems
on knowledge of the techniques in project evaluation.
1.3 OBJECTIVES
OF THE STUDY
The general
objectives of capital budgeting are
1
To determine the product scope, capital budgeting lets
project planners define the financial scope of a project.
2
To determine funding sources and how much money will
be needed form each source and the costs associated with using that funding
method.
3
To control project costs, capital budgets act as
control document throughout the life of the project.
4
To determine payback time, an important element of
capital budgeting is determining the project time.
While the objective of this
study is to find out the following.
1
To find out the extent to which capital evaluation techniques
are used by the Nigeria
breweries management in evaluating their projects.
2
To find out whether evaluated projects will yield
adequate return for the investors.
3
To determine the factor that influence the selection
of project to be invested in .
4
To determine the extent in which evaluation of capital
important in Nigeria
budgeting.
5
To find out if appropriate selection of human factory,
is the fidelity of the capital budgeting.
1.4 RESEARCH
QUESTION
The
following questions have been formulated as a guide for this research.
2
Do Nigeria
breweries management use capital evaluation techniques in evaluating their project?
3
To what extent does evaluated project yield adequate return
for investors?
4
What are the factors that influenced the selection of
project to be invested in?
5
To what extent is evaluation of capital project
important in NBC budgeting?
6
Is the appropriate selection of human factory the
fidelity of the capital budgeting?
1.5 RESEARCH
HYPOTHESIS:
The
hypotheses of this research are stated below:
1 HO: Nigerian breweries managements does
not use capital evaluation techniques in evaluating their project.
HA:
Nigerian breweries management use capital evaluation techniques in evaluating
their project.
2 HO: Evaluated project do not yield
adequate return for investors.
HA:
Evaluated project yield adequate return
for investors
3 Ho:
There are no other factors which influence the selecting of project to be
invested in
HA: Ho:
There are other factors which influence the selecting of project to be invested
in
4 HO:
Evaluation of capital is not important in Nigeria budgeting.
HA:
Evaluation of capital is important in Nigeria budgeting.
5 Ho:
Appropriate selection of human factory is not the fidelity of the capital
budgeting
HA:
Appropriate selection of human factory is the fidelity of the capital budgeting
1.6 SIGNIFICANCE
OF THE STUDY
The
outcome of the research work will be significant to the management of the Nigeria
breweries Limited who is faced with capital budgeting decision problem.
Furthermore, it will be significant to the investors who wish to invest in
capital project.
Finally it
will 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.
1.7 SCOPE OF
THE STUDY
The study
will examine the capital budgeting techniques of the Nigeria breweries and will be able
to establish techniques adopted by the firm stated in the theory. The study
will also examine the extent in which evaluation of capital important in Nigeria
budgeting and also whether evaluated projects will yield adequate return for
the investors.
1.8 OPERATIONAL
DEFINITION OF TERMS
CAPITAL BUDGETING: This is the long term plan
made for production, necessary to buy fixed asset for the production of the
goods and services.
Finance: This is the term used to donate
acquisition and spending of fund to met an economic unit objective
Cash flow: This is the asset of long-term
nature used in the production of goods.
Capital rationing: This is the allocation of
scare 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
other of their viability with reference to the evaluation result.
Capital expenditure: This is the
investment to acquire fixed or long-lived assets from which a stream of
benefits is expected
Budget: This is the plan that is qualified
in a monetary term
Private sector: This is the part of the economy
sometimes referred to as the citizen sector which is run by private individuals
or groups.
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