The following are 10 technical accounting terms introduced or emphasize Net present value Capital budgeting Incremental analysis Discount rate Payback period Present value Sunk cost Salvage value Return on average investment Capital budget audit Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the accounting term described, or answer "None" if the statement does not cor- rectly describe any of the terms. The examination of differences among revenue, costs, and cash flows under alternative courses a. of action. b. A cost incurred in the past that cannot be changed as a result of future actions. The process of planning and evaluating proposals for investments in plant assets. с.
The following are 10 technical accounting terms introduced or emphasize Net present value Capital budgeting Incremental analysis Discount rate Payback period Present value Sunk cost Salvage value Return on average investment Capital budget audit Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the accounting term described, or answer "None" if the statement does not cor- rectly describe any of the terms. The examination of differences among revenue, costs, and cash flows under alternative courses a. of action. b. A cost incurred in the past that cannot be changed as a result of future actions. The process of planning and evaluating proposals for investments in plant assets. с.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
26.1
Transcribed Image Text:Exercises
connect
The following are 10 technical accounting terms introduced or emphasized in this chapter.
Net present value
Capital budgeting
Incremental analysis
Discount rate
Payback period
Present value
Sunk cost
Salvage value
Return on average investment
Capital budget audit
Each of the following statements may (or may not) describe one of these technical terms. For each
statement, indicate the accounting term described, or answer "None" if the statement does not cor-
rectly describe any of the terms.
The examination of differences among revenue, costs, and cash flows under alternative courses
а.
of action.
b. A cost incurred in the past that cannot be changed as a result of future actions.
The process of planning and evaluating proposals for investments in plant assets.
Transcribed Image Text:Chapter 26 Capital Budgeting
d. The average annual net income from an investment expressed as a percentage of the average
amount invested.
The length of time necessary to recover the entire cost of an investment from resulting annual
net cash flows.
e.
f. The present value of an investment's expected future cash flows.
The amount of money today that is considered equivalent to the cash flows expected to take
place in the future.
h. The required rate of return used by an investor to discount future cash flows to their present
g.
value.
i. Often an investment's final cash flows to be considered in discounted cash flow analysis.
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