Page 62 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
Figure No.14 - Capital Budgeting Techniques

When asked about the use of cost of capital as a
hurdle rate and its calculation, it is found that 35%
said they do not have knowledge about hurdle rate,
28% said yes they use and calculate hurdle rate ,
37% said they do not calculate cost of capital as
hurdle rate.

It has been observed that for capital expenditure
decisions majority of the rms always use the
payback period method, sometimes use NPV
method and rarely use ARR method. It shows that
the majority of the respondent rms have been
using the prescribed techniques to take the capital
expenditure decisions. Even those who use capital
budgeting techniques sometimes there is a majority
of respondents who are using DCF methods.