Introduction to Agribusiness & Agricultural Economics

These flashcards cover key concepts related to capital investment analysis, including definitions and important financial terms.

Capital Investment

An outlay expected to result in benefits extending more than one year into the future.

Capital Budgeting

The process of evaluating capital investments.

Cash Flows

Initial payments of cash used for investment that generate returns in future periods.

Payback Method

A method for evaluating an investment based on how quickly the initial cost is recouped.

Present Value (PV)

The cash equivalent today that you would accept for a specified amount of cash at some future date.

Future Value (FV)

The combination of principal and interest of an investment at some future date.

Annuity

A series of equal cash payments made at equal intervals.

Simple Interest

Interest calculated only on the principal amount.

Compound Interest

Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

Interest Rate Risk Premium

The premium required by investors to compensate for the risk associated with changes in interest rates.