Pakistani-listed firms are using discounted cash flow methods of capital budgeting and preferring net present value over internal rate of return, according to a research paper
. Similarly, weighted average cost of capital is estimated using target value weights, and capital asset pricing model is used (with extra risk factors) to determine the cost of equity capital. The paper’s authors also found that, for risk assessment, sensitivity analysis and scenario analysis are the dominant approaches and the use of real options is very low.
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