Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
17 Cards in this Set
- Front
- Back
|
Accelerated cost recovery system acrs |
Depreciation method under us tax law that allow for the accelerated write-off of property under various classification |
|
|
Capital rationing |
The situation exists if a firm has positive and npv project but cannot obtain the necessary financing |
|
|
Contingency planning |
Taking into account the manager options implicit in a project |
|
|
Depreciation tax shield |
Tax saving that results from the depreciation deduction . Calculated as depreciation x corporate tax rate |
|
|
Erosion |
The cash flow revenue of a project that comes at the cost of an existing project |
|
|
Forecasting risk |
Possibility that Errors and projected cash flow will lead to incorrect decisions . Also called estimation risk |
|
|
Hard rationing |
A situation that occurs when a business cannot raise financing for projects under any circumstance |
|
|
Incremental cash flows |
The difference between a firm's future cash flow with a project and those without the project |
|
|
Managerial options |
Options that a manager can exploit if certain things happen in the future . Also known as real options |
|
|
Opportunity cost |
The most valuable alternative that is given up if a particular investment is undertaken |
|
|
Pro forma financial statements |
Financial statements that project future year operations |
|
|
Scenario analysis |
The determination of what happens to npv estimates when we ask what if questions |
|
|
Sensitivity analysis |
Investigation of what happens to npv when only one variable is changed |
|
|
Soft rationing |
Situation occurs when units in a business are allocated a certain funding for capital budgeting |
|
|
Stand alone principle |
The assumption that the valuation of a project may be based on the project's incremental cash flows |
|
|
Strategic options |
Options for future related business products or strategies |
|
|
Sunk cost |
Cost that has been incurred and cannot be recouped therefore should not be considered in an investment decision |
