BMGT 221 Chapter Notes - Chapter 13,13A: Current Liability, Cash Flow, Capital Budgeting

• School: University of Maryland
• Department: Business and Management
• Course: BMGT 221
• Professor: Bulmash

Document Summary

Net present value difference between present values of cash flows (inflow minus outflow: assume all cash moves at the end of the period, exc initial investment, assume all cash flows immediately reinvested at a rate of return equal to discount rate o to be acceptable, an investment must yield a return of at least the discount rate/factor, discount annual cost savings + salvage value to present value and add to cost of machine, pv factor of initial investment is 1, annuities chart only used for cumulative years together (example: 1 5 instead of 1, 2, 3 5 ) Zero npv return = discount: positive npv return > discount, negative npv return < discount, cost of capital average of how much they must pay back o usually is the required minimum rate of return (need to earn enough to compensate creditors) o screening device.