ACCT 2230 Chapter Notes - Chapter 13: Net Present Value, Current Liability, Investment
3 Dec 2016
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Document Summary
Capital budgeting: the process of planning signi cant outlays on projects that have long-term implications, such as purchasing new equipment or introducing a new product. Typical capital budgeting decisions: cost reduction decisions, expansion decisions, equipment selection decisions, lease or buy decisions, equipment replacement decisions. Screening decisions: decisions s to whether a proposed investment passes a pre-established pro tability hurdle. Preference decisions: decisions s to which of several competing acceptable investment proposals is best: need to recognize the time value of money, a dollar today is worth more than a dollar a year from now. Two methods to capital budget decisions: net present value. Discounted cash flows: the net present value method. Net present value: the difference between the present value of the cash in ows and the present value of the cash out ows associated with an investment project. Emphasis on cash flows: focus on cash ows and not on accounting income.
