RANKING AND SELECTION METHODS FOR CAPITAL INVESTMENT DECISIONS IN PRIVATE AND PUBLIC SECTORS

The paper surveys and illustrates various analytical methods for assisting the capital investment decision process. Attention is limited to capital investments made by firms--referred to collectively as the private sector--and those made by governmental organizations within the public sector. Even though such a dichotomization is not complete--as witnessed by the governmental regulation, and sometimes control, of private entities--it does serve as a usable framework for the various methodologies discussed in this paper. The scope of private investment decisions includes new fixed assets, replacement of existing fixed assets, make or buy decisions, buy or lease decisions, new product lines, and changes in distribution systems. Alternatively, governmental investment decisions could involve such public areas as health, education, transportation, recreation, and even space.