Capital Budget Practices: A Study With Water And Sanitation Companies


This paper aims to identify major capital budgeting practices employed in water supply and wastewater companies listed on the BM&FBOVESPA. To achieve this goal, a questionnaire was employed to collect data. Thus, the results of the research points the Net Present Value and Internal Rate of Return methods as the most widely used to evaluate investments; however it was found less use of real options method. Moreover, the technique most often mentioned in the literature to define the minimum rate of return acceptable for new investments, the WACC, is used by every company studied. It was also found that scenario analysis followed by Monte Carlo simulation and sensitivity analysis is widely applied for risk assessments. Besides choosing the most appropriate technique in valuations of investments, other procedures such as the adoption of investments manual and audits after the investments are common and important practices within the scope of companies analyzed.

ipea - Planejamento e Políticas Públicas