Chapter 12 Flashcards Preview

Accounting > Chapter 12 > Flashcards

Flashcards in Chapter 12 Deck (17)
Loading flashcards...
1
Q

Typical capital budgeting decisions managers face

A

Cosr reduction decisions and expansion decisions

2
Q

Screening Decisions

A

A budgeting decision that asks if the project meets or exceeds a hurdle rate

3
Q

Preference decisions

A

A budgeting decision for those projects that meet or exceed a hurdle rate, which one is the best?

4
Q

Payback period

A

Number of years needed to recover the investment

5
Q

Payback period formula

A

Investment/net cash flows

6
Q

Accounting rate of return

A

Uses accrual accounting for NOI

7
Q

Accounting rate of return formula

A

Annual accrual net operating income/investment

8
Q

Net present value

A

Accept project if npv>=0

9
Q

Npv formula

A

Pv cash inflows-pv cash outflows

10
Q

Internal rate of return

A

Discount rate that results in a npv of 0

11
Q

IRR formula

A

Investment/net cash flows

12
Q

Straight line depresciation

A

Cost-residual value/lifetime

13
Q

Techqiques that consider the time value of money

A

NPV and IRR

14
Q

Techniques that dont consider time value of money

A

Payback period and ARR

15
Q

Accept project if

A

Npv is positive or zero

16
Q

Profitablility index

A

Npv/investment

17
Q

Computes unique rate of return

A

IRR