An Exploratory study of a comparison between the UK and Czech Republic of the financial models used in the appraisal of ICT and non-ICT capital projects
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Technická Univerzita v Liberci
Technical university of Liberec, Czech Republic
Technical university of Liberec, Czech Republic
Abstract
Our research is aimed at identifying the current practices in respect of the financial appraisal of information communication technology and non-ICT projects. We look specifically at the UK – a well-established market economy – and the Czech Republic – an emerging market economy. Our research is based on a unique survey, which simultaneously examines the financial appraisal models used in the two types of projects, and addresses these issues from two diverse market economies. An important fi nding is that any differences in the fi nancial models used relate to the two countries rather than between ICT or non-ICT projects. While both countries make extensive use of the payback model, they fully defend the view that this model infl uences a short-term mentality.The Czech Republic, more so than the UK, also support the view that the payback is unsuitable for appraising information communication technology projects, yet they still use it to appraise such projects. The Czech Republic places less importance on the discounted cashfl ow models than the UK, with the Czech Republic preferring the ‘net present value’ to the ‘internal rate of return’. The UK, by using an ‘opportunity cost of capital’ approach in the determination of the ‘discount rate’, may be making it harder to achieve a positive net present value than the Czech Republic, who adopt an approach which is nearer to the true cost of capital. This exploratory study will aid both practitioners and academics in a greater understanding of the appraisal of capital assets and focus future research in a positive way.
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market exit, management’s decisions, non-nested microeconomic models, Slovenia
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12123609