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17 Cards in this Set

  • Front
  • Back
What is capital budgeting?
how to spend capital
What is a cash flow?
- any cash in or cash flow out
-most difficult part of the project
Should overhead cost be incorporated?
-only if they change when introducing a new project
-and if they are truly incremental
What kind of finance costs should be ignored?
interest expense
How do most firms make money?
not by selling investments
-make money by charging client fees
-producing products to make money
How is depreciable value calculated?
purchase price + shipping and installation charges
What do we do with salvage value?
Since using tax accounting you do not subtract salve value
How do you calculate book value?
initial cost of machine - accumulated depreciation
What constitutes a capital gain?
if sale price is larger than book value
What constitutes a capital loss?
if the sale price is less than book value
How is depreciable value calculated?
purchase price + shipping and installation charges
What do we do with salvage value?
Since using tax accounting you do not subtract salve value
How do you calculate book value?
initial cost of machine - accumulated depreciation
What constitutes a capital gain?
if sale price is larger than book value
What constitutes a capital loss?
if the sale price is less than book value
What is another term for a project?
a investment or a long term asset
4 reasons for importance of Capital Budgeting?
-Increase shareholder wealth
-Bad Investment could cost the company
-Budgeting Process- Short Term
-Sufficient Money in the long term