BU393 Study Guide - Midterm Guide: Capital Cost Allowance, Operating Cash Flow, Tax Shield
Document Summary
Chapter 9 capital budgeting: introduction & techniques. I(cid:374)(cid:448)est(cid:373)e(cid:374)t de(cid:272)isio(cid:374)s ha(cid:448)e a g(cid:396)eate(cid:396) i(cid:373)pa(cid:272)t o(cid:374) a (cid:271)usi(cid:374)ess" futu(cid:396)e tha(cid:374) any other decision it makes. This chapter investigates methods for evaluating long-term investment decisions. Capital budgeting refers to the process of deciding which long- term investments or projects a firm will acquire. Management must be vigilant at this stage to ensure the costs reflect what was initially proposed and evaluated: post audit : once a project is completed, management must compare the costs and revenue with the original projections. Take(cid:374) togethe(cid:396), these steps (cid:272)a(cid:374) d(cid:396)a(cid:373)ati(cid:272)all(cid:455) i(cid:373)p(cid:396)o(cid:448)e a fi(cid:396)(cid:373)"s a(cid:271)ilit(cid:455) to select wealth increasing projects, bring them to fruition, and learn from that experience. Number of years required to recapture initial investment. Accept if greater than or equal to 0. Accept if greater than or equal to cost of capital. The ratio of the pv of the cash inflows to outflows.
