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Accounting 2102 > Ch 25 Planning For Capital Investments > Flashcards

Ch 25 Planning For Capital Investments Flashcards

1
Q

Annual Rate of Return

A

Expected Annual Net Income/ Avg. Investment = Annual Rate of Return

  • Avg Investment = ( Original Investment + Salvage Value )/2
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2
Q

Cash Back Pay Period

A

Cost of Capital Investment/ Net Annual Cash Flow = Cash Back Pay Period

*shorter payback period means more attractive investment

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3
Q

Profitability Index

A

Present Value of Net Cash Flows/ Initial Investment = Profitability Index

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4
Q

Internal Rate of Return Factor

A

Capital Investment/ Net Annual Cash Flow = IRR Factor

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Accounting 2102 (7 decks)

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