The role of net present value in project selection: A case study of Nigerian oil companies
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
- Reference Style:
- Recommended for :
- NGN 5000
Background of the Study
Net Present Value (NPV) is one of the most widely used techniques in capital budgeting, helping companies evaluate the profitability of investment projects. NPV calculates the difference between the present value of cash inflows generated by an investment and the initial cost of the investment, with all future cash flows discounted to their present value. In the context of Nigerian oil companies, where investments in exploration, production, and infrastructure require significant capital, the application of NPV can guide decision-making by providing a clear measure of potential profitability (Ogundipe & Akinyemi, 2023). Oil companies in Nigeria, including industry leaders such as Chevron, Shell, and Total, frequently face large-scale projects where NPV is used to prioritize investments and ensure that resources are allocated to the most profitable ventures. However, the complexities of the Nigerian oil industry, including volatile oil prices, regulatory changes, and environmental concerns, may affect the accuracy of NPV projections. This study will assess the role of NPV in the project selection process within Nigerian oil companies.
Statement of the Problem
Although NPV is a valuable tool in capital budgeting, its application in Nigerian oil companies may be hindered by factors such as fluctuating oil prices, exchange rate volatility, and changes in government policies. This study will investigate how NPV is applied to project selection in Nigerian oil companies, considering both its advantages and limitations in the face of these external factors.
Objectives of the Study
- To examine how Nigerian oil companies use NPV in project selection.
- To assess the effectiveness of NPV in evaluating investment opportunities in the Nigerian oil industry.
- To recommend ways to improve the application of NPV in project selection for Nigerian oil companies.
Research Questions
- How do Nigerian oil companies use NPV to select investment projects?
- What are the advantages and limitations of using NPV in project selection within the Nigerian oil industry?
- How can Nigerian oil companies improve the accuracy and reliability of NPV calculations in the face of market uncertainties?
Research Hypotheses
- NPV is the primary method used for project selection in Nigerian oil companies.
- NPV is an effective tool for evaluating the profitability of projects in Nigerian oil companies.
- External factors such as oil price fluctuations and regulatory changes significantly affect the reliability of NPV in project selection.
Scope and Limitations of the Study
This study will focus on Nigerian oil companies and evaluate their use of NPV in project selection. Data will be collected from company financial reports, project evaluation documents, and interviews with managers involved in investment decisions. Limitations include the difficulty in obtaining detailed financial data and the complexity of considering external factors that influence NPV calculations.
Definitions of Terms
- Net Present Value (NPV): A capital budgeting technique that calculates the difference between the present value of an investment’s expected cash inflows and its initial cost.
- Project Selection: The process of evaluating and choosing investment projects based on their potential return and alignment with organizational goals.
- Capital Budgeting: The process of planning and managing investments in long-term assets and projects.
Related Project Materials
The effect of global security policies on non-proliferation efforts: An evaluation of nuclear agreements in Oyo State
Background of the Study:
Global security policies significantly influence non-proliferation efforts by shaping the international framewor...
MODERN STRATEGIES TO IMPROVE THE PERFORMANCES OF STUDENTS IN CHEMISTRY IN SOME SELECTED SECONDARY SCHOOL
ABSTRACT
This research work is designed to find out the modern strategies of improving the performance of students in Oredo Local Governm...
An evaluation of traditional institutions and political participation in local governance: A study of Ewekoro Local Government Area, Ogun State
Background of the study
Traditional institutions have long played a fundamental role in shaping political participation an...
An investigation of the impact of microfinance banks on small and medium enterprises in Warri South Local Government Area, Delta State
Background of the study
Microfinance banks play a crucial role in enhancing the financial inclusion of small and medium ent...
The effect of indigenous agricultural practices on food security in Ifo Local Government, Ogun State.
Background of the Study:
Indigenous agricultural practices are time-tested methods rooted in local ecologi...
The Effect of E-Government Systems on Public Service Efficiency: A Case Study of Government Agencies in Taraba State
Background of the Study
E-government systems have become essential tools for enhancing the efficiency, transparency, and accessibility of...
An evaluation of the role of motor parks in local economic activities in Oshodi-Isolo Local Government Area, Lagos State.
Background of the study:
Motor parks in Oshodi-Isolo serve as crucial hubs for local commerce and transportation. They provide an organiz...
The effect of high-fidelity simulation on students’ clinical decision-making skills in University of Benin Teaching Hospital
Background of the Study
High-fidelity simulation (HFS) has emerged as a transformative teaching tool...
The impact of sports mentorship programs on students' career aspirations in Makurdi Local Government Area, Benue State
Background of the study
In Makurdi Local Government Area, Benue State, sports mentorship programs have emerged as a vital mechanism for i...
An assessment of the impact of new religious movements on ancestral worship in Obubra Local Government, Cross River State
Background of the Study
Ancestral worship has traditionally been a cornerstone of spiritual life in Obubra Local Governmen...
