ACC 310F Study Guide - Quiz Guide: Discounted Cash Flow, Capital Budgeting, Cash Flow
Document Summary
List the components of a project"s cash flows and apply discounted cash flow techniques. Identify issues in allocating scarce capital among projects. Capital budgeting is a tool that explicitly incorporates the time value of money in decisions involving significant long-term investments. Dollar today is worth more than a dollar tomorrow. Opportunity cost is the time value of money. Considers this by discounting future cash inflows and outflows to their current or present value. Operating budgets are short-term plans that aim for the maximum possible contribution from available capacity resources. Helps determine how much of each capacity resource an organization should acquire and how it should invest its capital in specific assets such as plant, equipment, building, and technology. Capital budgets allocate scarce capital among available investment opportunities. Lesson 2: project cash flows and discounted cash flow techniques. Includes all costs incurred to ready the asset for its intended use.
