Stephen E. Celec, E. Joe Nosari and Dan Voich
A common justification for state term commodity contracts is that they are beneficial to taxpayers because of savings that result from the price concessions expected from volume…
Abstract
A common justification for state term commodity contracts is that they are beneficial to taxpayers because of savings that result from the price concessions expected from volume purchasing. With the growing popularity of performance based budgeting in state legislatures, there is a clear need for performance measures to document these taxpayer benefits. Based on a survey of state purchasing offices and a review of the major purchasing associations and the academic literature, this paper develops guidelines and a set of performance measures for evaluating the financial benefits of state term commodity contracts.
James S. Ang and Stephen P. Dukas
The Net Present Value (NPV) criterion of project evaluation has traditionally been accepted as the theoretically superior capital budgeting technique due to its concordance with…
Abstract
The Net Present Value (NPV) criterion of project evaluation has traditionally been accepted as the theoretically superior capital budgeting technique due to its concordance with the principal of value maximization. Recently, several authors have criticized the application of this criterion in that it understates the true value of an investment by ignoring 1. strategic growth opportunities, 2. the fact that management can discontinue the project before the end of its economic life, 3. the ability of management to delay the investment decision, 4. the arrival of information throughout the life of the project, and 5. management's option to temporarily “shut down” the production process. Through these omissions, it has been asserted that the use of net present value criteria has undermined the levels of real investment in this country, and stunted economic growth.