The capital investment decision under inflation in Vietnam : a case study

Inflation and its adverse impacts on the economy are attacking Vietnamese enterprises at two-digit level at present. The managers need the effective foreseeing tools to prepare their budget to be suit to the complex evolvement of market economy and wait in front of the possible risks in future. A Cash Budget model which contains the trends of changes in variables under the impact of inflation will help Vietnamese soldering sticks manufacturers to control operational capital sources and forecast on the necessary borrowings as well as the payments in the near future better. ANOVA F-test experiments give the company more alternative choices between different types of machines and outline the initial investment costs of project. Finally, Capital Budgeting methods will assist to check the effectiveness in long-term of the investment. The theories on relationship between normal interest rate, real interest rate and inflation rate such as the Fisher equation, the discount rate of Cash flows therefore are studied carefully to discuss, argue and give out the deep understanding and new perceptions.