Capital budgeting in practice – A case study of a Finnish retail company

Thumbnail Image

Files

URL

Journal Title

Journal ISSN

Volume Title

School of Business | Bachelor's thesis
Electronic archive copy is available locally at the Harald Herlin Learning Centre. The staff of Aalto University has access to the electronic bachelor's theses by logging into Aaltodoc with their personal Aalto user ID. Read more about the availability of the bachelor's theses.
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.

Authors

Date

2025

Department

Laskentatoimen laitos

Major/Subject

Mcode

Degree programme

Laskentatoimi

Language

en

Pages

28 + 4

Series

Abstract

Capital budgeting is a crucial part of management accounting, guiding firms in evaluating long-term investments and allocating resources effectively. While advanced tools for evaluating strategic investments exist, Alkaraan and Northcott (2006) show that firms continue to favor traditional methods such as Net Present Value (NPV) and Internal rate of return (IRR). Emergent techniques such as real options and balanced scorecard remain underused, pointing to a clear gap between theory and practice. This thesis examines how capital budgeting methods are applied in a large Finnish retail company and compares the findings with insights from academic literature. The thesis uses Alkaraan & Northcott (2006) as a theoretical framework, focusing particularly on the similarities and differences in the treatment of strategic versus non-strategic investments. The findings show a strong reliance on traditional discounted cash flow techniques, especially NPV, across both strategic and non-strategic investments. Strategic tools such as real options or the balanced scorecard were not used at the operational level, and discount rates were standardized rather than project specific.

Description

Thesis advisor

Vaivio, Juhani

Keywords

capital budgeting, net present value, internal rate of return, WACC, real options, payback period, retail industry

Other note

Citation

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202506225175

Collections

[kand] Kauppakorkeakoulu / BIZ