Capital Budgeting Flashcards
What is the difference between capitalization rate vs discount rate
capitalization rate = companies expected long-term annual growth from discount rate
What is the NPV
helps choose between projects
What is the IRR
determines the yield on investment
What is the Payback period
Calculates time required to recover the initial investment from project cashflows
Initial Investment /Net annual cash inflows
What is capital rationing?
Typically rank from highest NPV to lowest or Profitability index ( NPV/Investment
What is abandonment decisions
if PV of existing a project is greater than continuing needs to abandon the project
What are post-audit of capital investments?
did the projected IRR and NPV materialize for completed capital projects?
If underperformed why should be investigated
