Capital Budgeting Flashcards
1
Q
Significance of: Net Present Value (NPV)
A
An important measure telling us how much profit/loss a project generated. It is seen as a useful figure as it accounts for the opportunity cost of investing the money in the capital market and thus takes the present value of money into account.
2
Q
Significance of: Internal Rate of Return (IRR)
A
The profitability of a Project in Percent.
3
Q
Definition: Weighted Average Cost of Capital (WACC)
A
Calculates the cost of capital by taking the weighted average cost of the firms liabilities and its equity used to finance assets into account.
