CH 24: Capital Budgeting

Vocabulary flashcards based on the concepts from the Capital Budgeting lecture notes.

Capital Budgeting

The process of planning and managing a firm's long-term investments.

Net Present Value (NPV)

The difference between the present value of cash inflows and outflows over a period of time.

Internal Rate of Return (IRR)

The discount rate that makes the NPV of a project zero.

Payback Period

The time required to recover the initial investment from cash inflows.

Discount Rate

The minimum acceptable return on an investment, often referred to as the cost of capital or hurdle rate.

Cash Flow

The total amount of money being transferred into and out of a business.

Initial Investment

The initial capital required to start a project or purchase an asset.

Disinvestment

The process of selling an asset to reduce debt or improve cash flow.

Depreciation Tax Shield

The reduction in taxable income resulting from the depreciation expense.

Salvage Value

The estimated residual value of an asset at the end of its useful life.