ACG 2071 Final Exam

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Last updated 9:54 PM on 7/28/26
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9 Terms

1
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Payback Period

Initial investment / Annual net cash inflow

2
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SRR or ARR

Operating income / Initial investment

  • AKAL: (Annual net cash inflows - depreciation expense) / Initial investment

3
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Depreciation expense

(Initial expense - salvage value) / useful life in years

4
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Internal Rate of Return

Interest rate that makes NPV of investment = 0.

  • PV inflowsx - PV outflows = 0 (solve for x)

5
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Profitability Index

PV of net cash inflows / Initial investment

6
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Predetermined MOH rate

Estimated total MOH / Estimated total allocation base

7
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MOH applied

Predetermined MOH rate (or Activity Rate) * Amount of allocation base used

8
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Activity rate

Estimated total costs in pool / Estimated total amount of allocation base

9
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Conversion costs

DL + MOH