Enhance Your Learning with Economics - Capital Budgeting Flash Cards for quick learning
The process of planning and evaluating long-term investment projects to determine their profitability and feasibility.
The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.
A capital budgeting technique that calculates the present value of expected cash flows and subtracts the initial investment to determine the project's profitability.
The discount rate that makes the net present value of a project's cash flows equal to zero, indicating the project's rate of return.
The length of time required to recover the initial investment in a project through expected cash flows.
A capital budgeting technique that measures the ratio of the present value of expected cash inflows to the present value of the initial investment.
The process of assessing the impact of changes in key variables on the profitability of a project.
The consideration of potential risks and uncertainties in estimating future cash flows and evaluating investment projects.
The situation where a company has limited funds and must select the most profitable investment projects within the available budget.
The evaluation of whether to replace existing assets with new ones based on their expected cash flows and costs.
Investment projects that compete with each other, where selecting one project means rejecting the others.
Methods and approaches used to evaluate and select investment projects, such as net present value, internal rate of return, and payback period.
Various techniques used to assess the financial viability and profitability of investment projects.
The required rate of return or discount rate used to evaluate investment projects, reflecting the company's cost of financing.
The benchmarks and standards used to determine whether an investment project should be accepted or rejected.
The step-by-step approach followed by companies to identify, evaluate, and select investment projects.
The application of capital budgeting techniques and decision-making frameworks in real-world business scenarios.
The consideration of additional strategic options and flexibility in investment decision-making, beyond traditional financial analysis.
The evaluation of the ethical implications and consequences of investment decisions, including social and environmental impacts.
Real-life examples and scenarios that illustrate the application of capital budgeting techniques and decision-making processes.
The obstacles and difficulties faced by companies in the capital budgeting process, such as uncertainty, complexity, and resource constraints.
The recommended approaches and strategies for effective and efficient capital budgeting, based on industry standards and expert insights.
The specialized vocabulary and terms used in the field of capital budgeting, including concepts like sunk costs, opportunity costs, and incremental cash flows.
The mathematical equations and formulas used to calculate key metrics and indicators in capital budgeting, such as net present value and internal rate of return.
Illustrative examples and numerical calculations that demonstrate the application of capital budgeting techniques and decision criteria.
Practical exercises and problems that allow learners to practice and apply their knowledge of capital budgeting concepts and techniques.
A test or assessment to evaluate the understanding and retention of capital budgeting concepts, methods, and decision-making frameworks.