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19 Cards in this Set
- Front
- Back
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capital expenditure decisions
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investment decisions involving the acquisition of long-lived assets
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capital budgeting decisions
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Investment decisions
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capital budget
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the final list of approved projects
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required rate of return
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the minimum rate that top management wants to earn on investments
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net present value
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the sum of the present values of all cash flows
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internal rate of return
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the rate of return that equates the present value of future cash flows to the investment outlay
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cost of capital
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the weighted average of the costs of debt and equity financing used to generate capital for investments
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depreciation tax shield
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the tax savings resulting from depreciation
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accounting rate of return
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is equal to the average after-tax income form a projected dividend by the average investment in the project
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payback period
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the length of time it takes to recover the initial cost of an investment
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Budgets
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the formal documents that quantify a company's plans for achieving its goals
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Budget Committee
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the group within a company that is responsible for approval of the various budgets
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Budget variences
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differences between budgeted and actual amounts
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Flexible budget
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a set of budget relationships that can be adjusted to various activity levels
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Management by exception
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only exceptional budget variences are investigated
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Master budget
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a comprehensive planning document that incorporates a number of individual budgets
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Slack
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a budget with targets that are easy to achieve
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Static budget
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a budget that is not adjusted for the actual level of production
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Zero-based budgeting
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a method of budget preparation that requires budgeted amounts to be justified by each department at the start of each budget period, even if the amounts were supported in prior budget periods
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