Comparing Project Prioritization Method and Net Present Value Method of Capital Rationing Using Kendall's Tau Distance

摘要

This study is the result of management's intention to optimize their various capital investment decision processes within the organization. Since huge amount of corporate funds are allocated to capital expenditure, the management of the firm decided to look for an alternative capital rationing technique to revise the traditional method (i.e. net present value) that they are currently using. The alternative model should incorporate the non-financial aspects such as performance measurements to determine how performance and other factors may be altered to create the most utility for the least cost, in terms of the firm's service cost, support cost and social cost. With this need of including qualitative factors in the selection of firm's capital investment projects, an alternative model called the Project Prioritization Method (PPM) using as tool the Analytic Hierarchy Process (AHP) was developed.