ADMS 2510 Lecture Notes - Working Capital, Payback Period, Capital Budgeting
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ADMS 2510 Full Course Notes
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Capital budgeting: the process of planning significant outlays on projects that have long-term implications, such as the purchase of new equipment or the introduction of a new product. Screening decision: a decision as to whether a proposed investment meets some pre-established profitability hurdle. Preference decision: a decision as to which of several competing acceptable investment proposals is best. Net present value: the difference between the present value of the cash inflows and the present value of the cash outflows associated with an investment project. Working capital: the excess of current assets over current liabilities. Cost of capital: the average rate of return companies must pay to long-term creditors and shareholders for the use of their funds. Out of pocket costs: actual cash outlays for operating costs. Internal rate of return: the discount rate at which the net present value of an investment project is zero.