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11 Cards in this Set

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WACC

Capital Budgeting

Method we use to justify the acquisition of capital goods

Payback

Profitability index

International rate of return

The actual rate of return of an investment, and it uses the time value of money in its calculation

Accounting rate of return

Mutually exclusive

One is chosen and others are automatically sacrificed or excluded

Independent

Investment that are not mutually exclusive are chosen because they have positive net present value

Capital rationing

Constraint placed on the amount of funds that can be invested in a given time period

Post-audit

5 steps in capital budgeting

1 Formulate a proposal


2 Evaluate the data


3 make a decision


4 follow up


5 take corrective action