Revisiting Net Present Value: Usage, Challenges, and Implications for Corporate Finance
Purpose: This study critically examines the role of Net Present Value (NPV) in contemporary capital budgeting, evaluating its theoretical foundations and practical application across industries and firm sizes. It aims to assess the extent to which NPV remains the dominant decision-making tool and to explore the use of complementary techniques such as Internal Rate of Return (IRR) and Payback Period. Design/Methodology/Approach: A survey-based quantitative approach was employed, collecting responses from 212 finance professionals across manufacturing, technology, services, and infrastructure sectors. The survey measured the frequency of capital budgeting technique usage, perceptions of NPV’s advantages, and challenges in its application. Data analysis included descriptive statistics, cross-industry comparisons, and evaluation of firm size-related variations. Findings: Results indicate that 68% of firms use NPV frequently or always, particularly large and capital-intensive firms. Smaller firms and certain industries demonstrated a stronger reliance on IRR or Payback Period. Respondents recognized NPV’s strategic benefits, including decision support and shareholder wealth maximization, while highlighting challenges such as sensitivity to discount rates, forecasting difficulties, and organizational constraints. Practical Implications: The study suggests that managers should adopt an integrative, multi-method approach, combining NPV with complementary techniques to address practical limitations and enhance the robustness of investment decisions. Originality/Value: This research bridges the theory–practice gap in capital budgeting, reaffirming NPV’s conceptual primacy while highlighting the role of managerial judgment, organizational context, and pragmatic decision-making in real-world investment appraisal.