Capital Budgeting Decision In Road Transport – Study Of Gibraltar Engineering Company, Aba, Nigeria

Abstract

This paper is a report of a study on application of capital expenditure decision models in road transport industry, a case of Gibraltar Engineering Company in Aba, Abia State.
The specific objective of the study was an attempt to apply capital budgeting decision models to some specific capital expenditure problems bothering the transport industry. In order to achieve the objective Gilbraltar Engineering Company was used as a case study. At Gilbraltar Engineering Company, there was lack of consensus among the management of the company on which of the following capital projects to invest its fund:

To lease vehicle or
To refurbish existing vehicles or
To purchase fairly used vehicle
The proposals were evaluated with the identified capital budgeting decision models.
The findings of the study revealed that it is most desirable for the firm to make investment on refurbishing it's broken down vehicles, while investment in vehicle leasing is unfavourable, because it lacks potential for increasing the value of the firm. In conclusion, capital budgeting decision model should be employed in evaluation of capital expenditure proposals to ensure sound capital expenditure decision making in Road Transport Industry


JORIND Vol. 5 (1) 2007: pp. 158-169