ACCT 23021 Lecture Notes - Lecture 17: Interest, Water Efficiency, Compound Interest
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2 Aug 2020
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Describe the importance of capital investments and the. Use the payback and accounting rate of return methods. Use the time value of money to compute the present and. Use discounted cash flow models to make capital. Capital investment decisions and the time value of money. 12. 3 future values of single lump sums and annuities. Describe the importance of capital investments and the capital budgeting process. Capital budgeting: the process of making capital investment decisions. Examples (significant sum of money & used for a long period of time): Net cash inflows against cash outflows from investment. Leed certification promotes sustainable practices in building and construction industry. Payback: length of time to recover, in net cash inflows, the cost of the capital outlay. Measures how quickly managers expect to recover investment dollars. Payback with equal annual net cash inflows example (1 of 3) Tierra firma is considering a potential investment in an energy- efficient hvac system that is expected to cost ,000.
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FILL IN THE CORRECT TERMINOLOGIES IN THE BLANK SPACES | ||
_____ 1. | a. A method of internal (managerial accounting) reporting that emphasizes the distinction between variable and fixed costs. | |
_____ 2. | b. A discounted cash flow approach to capital budgeting that computes the present value of all future cash flows. | |
_____ 3. | c. Determination of the maximum cost a company can spend to make a product given a set volume, selling price and desired operating profit. | |
_____ 4. | d. An analysis of the additional costs and benefits of a proposed alternative compared with the current situation. | |
_____ 5. | e. A historical cost that the company has already incurred which is irrelevant to the decision making process. | |
_____ 6. | f. Costs that will not continue if an ongoing operation is changed or deleted. | |
_____ 7. | g. An already owned production site that is not currently in use. | |
_____ 8. | h. The maximum available benefit foregone by using a resource for a particular purpose. | |
_____ 9. | i. The predicted future costs and revenues that will differ among alternative courses of action. | |
_____ 10. | J. The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project | |
_____ 11. | k. Those costs of facilities and services that are shared by users | |
_____ 12. | l. The juncture of manufacturing where separate products developed in the same process become individually identifiable. | |
_____ 13. | m. A costing approach that considers all indirect manufacturing costs (both variable and fixed) to be product (inventoriable) costs. | |
_____ 14. | n. Purchasing products or services from a supplier outside the company. | |
_____ 15. | o. Capital budgeting models that focus on cash inflows and ouflows while taking into account the time value of money | |
_____ 16. | p. Calculation of a selling price sufficient to cover the cost of producing a product as well as desired operating income | |
_____ 17 | q. The long-term planning for investment commitments with returns spread over multiple years | |
_____ 18. | r. A decision process that compares the differential revenues and costs of alternatives. | |
_____ 19. | s. Costs that will continue even if a company discontinues one of its current operations | |
_____ 20. | t. The increase in expected average annual operating income divided by the original required investment |