Capital investment appraisal literature accepts the assumption that the objective of a firm‟s manager is to maximise firm
value, that is, the wealth of its shareholders (Afonso & Cunha, 2009). Therefore, the financial manager must be concerned
with the capital investment appraisal and cost of capital estimation decisions. In this process, it becomes crucial for
management to use accurate methods that will result in the maximization of shareholder wealth (Ryan & Ryan, 2002). In
fact, managers must undertake capital investment projects only if they add to the value of the firm, which implies that
managers should identify and undertake all projects that add value to the firm so as to maximise shareholder wealth