Capital Budgeting Flashcards
1
Q
What is TCO?
A
Total Cost of Ownership:
The cost of acquiring and operating an asset
2
Q
What is ROI?
A
Return On Investment:
Evaluates the efficiency of an investment.
Amount of Benefits / Total Costs
3
Q
What are some methods of ROI?
A
- Payback Period
- Net Present Value
- Internal Rate of Return
- Profitability Index
4
Q
How do you calculate Payback Period?
A
Cost of Investment / Cash Inflow
5
Q
How do you calculate Profitability Index?
A
PV of future cash flows / Initial Investment
