A number of terms are listed below:
Select the terms from the above list to complete the following sentences. The goal of ________________ is to provide capacity in a planned and orderly manner that will match the predicted demand growth of the company and achieve a targeted __________ _____________ on these investments. The determination of the ROR links closely to the operating income or profit on sales. That is why ___________ affect the statement of financial position, the statement of comprehensive income, and the statement of cash flows. Capital budgeting requires a careful analysis of the amount and timing of cash outflows and cash inflows. There are four methods from which a management team can choose: ___ _______ __, ________ ____ __ ______, _______, __________ _______ ____ __ ______ (or ______ __ _______). The first two methods require the calculation of discounted cash flow. The NPV method requires that the management team determine what its ________ ____ ____(___) must be (also called the discount rate, hurdle rate, or opportunity cost of capital). This discount rate is the return the team could expect from investing in a different project of similar risk. In contrast the IRR (sometimes called the ________ ____ __ ______) is fully determined by cash inflow and outflow. It is the rate at which the discounted net cash flow is zero. The _______ is based on nominal, not discounted, cash flow. It is simply the total investment divided by cash inflow to determine the time it takes to recover the cost of the investment. The ____ is calculated by dividing the increase in an accrual, expected average operating income, by the cost of the initial investment.
Accounting Rate of Return adjusted rate of return accrual accounting rate of return (AARR) capital budgeting discounted cash flow (DCF) internal rate of return (IRR) discount rate hurdle rate investment decision investments net present value (NPV) opportunity cost of capital rate of return (ROR) return on investment (ROI) payback method required rate of return (RRR) time-adjusted rate of return