Chapter 11 Flashcards
Capital budgeting
The process of determining, evaluating and implementing long-term investment opportunities
Post-audit
An investigation, after the implementation of a project, to compare the actual and expected financial results
Investment outlay
The net cash outflow normally paid out at time zero in order to undertake a project
Compliance costs
Costs incurred to comply with laws, regulations or standards
Resource consent
Formal permission by a government authority to allow an individual or an organisation to undertake a specified activity that may otherwise contravene environmental laws
Incremental
Directly relevant; additional; over and above the status quo
Sunk costs
Cash outflows that have occured and cannot be reversed irrespective of whether the project is accepted or rejected
Capitalise
To treat an outlay as a long-term asset on the balance sheet, and not as an expense on the income statement
Depreciable asset
A long-term asset that has a limited life, such as buildings and equipment
Depreciable value
The value of an asset that is to be depreciated. Includes the purchase price plus instillation costs
Straight-line
A method of depreciation that expenses an asset by equal annual deductions
Diminishing value
A method of depreciation that allows for higher depreciation expense in the early years of an asset’s life
Adjusted tax value
For income tax purposes, the undepreciated balance of the depreciable value of an asset (also known as an asset’s book value for tax purposes)
Terminal value
An estimate of the value to the firm of a long-term asset at either the end of the life of the project or at a predetermined cut-off point
