CHAPTER 7 Flashcards
is the process of planning and controlling for long-terms projects
Capital Budgeting
The accounting rate of return is an average of some of the firms capital projects.
False
2 Types of capital investment Decision
Screening Decisions
Preference Decisions
It is an instrument is found by by dividing 1 by the payback period
Payback Reciprocal
It tells managers how much net income a potential project is expected to generate as a telefive percentage of the investment required
Accounting rate of returns
2 capital budgeting methods
non-discounting methods
Discounted cash flow methods
Formula of payback period
Net/initial Investment ÷ Annual/Net cash flow
what are the terms to use in the discussion
Net investment
Cost or cash outflows
Saving or cash inflow
Cost of Capital
Formula of ARR
Average annual profit or average net income ÷ Average or Net investment
