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13 Cards in this Set
- Front
- Back
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Annuity
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a series of equal cash flows at fixed intervals.
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Average rate of return
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a method of evaluating capital investment proposals that focuses on the expected profitability of the investment.
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Capital investment analysis
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the process by which management plans, evaluates, and controls long-term capital investments involving fixed assets.
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Capital rationing
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the process by which management allocates available investment proposals.
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Cash payback period
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the expected period of time that will elapse between the date of a capital expenditure and the complete recovery in cash (or equivalent) of the amount invested.
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Currency exchange rate
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the rate at which currency in another country can be exchanged for local currency.
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Inflation
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a period when prices in general are rising and the purchasing power of money is declining.
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Internal rate of return method
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a method of analyzing proposed capital investments that focuses on using present value concepts to compute the rate of return from the net cash flows expected from the investment.
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Net present value method
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a method of analyzing proposed capital investments that focuses on the present value of the cash flows expected from the investments.
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Present value concept
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cash today is not the equivalent of the same amount of money to be received in the future.
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Present value index
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An index computed by dividing the total present value of the net cash flow to be received from a proposed capital investment by the amount to be invested.
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Present value of an annuity
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the sum of the present values of a series of equal cash flows to be received at fixed intervals.
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Time value of money concept
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the concept that an amount of money invested today will earn interest.
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