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Study these flashcards

- Texas
- Baylor University
- Final Exam

to g.

• 36

cards
Payback Period

How long it takes to recoup investment

Discounted Payback period

how long it takes to recoup investment using discounted cash flows

Average Accounting return

avg. accounting profit/avg. accounting value

Net Present Value

PVinflows-PVoutflows

Internal Rate of Return

discounted rate that balances PVinflows and PVoutflows

Profitability Index

PVinflows/PVoutflows

Capital Budgeting

Capital Financing

Flotation costs

Cost of OLD preferred stock

Cost of NEW preferred stock

Cost of NEW common stock

Cost of OLD common stock

True or False: There is a direct relationship between the companies size and the cost of capital

True or False: as weighted average cost of capital increases, the Payback decreases.

True or False: as the Weighted Average Cost of Capital increases, discounted payback increases.

When AAR>WACC, do you accept or reject the project?

When AAR<WACC, do you accept or reject the project?

True or false: Net Present Value considers cashflows.

True or false: Net Present Value does not use Time Value of Money.

True or False: Net Present Value gives an absolute decision standard?

True or False: Internal Rate of Return is the rate that makes NPV=0.

If IRR>WACC, do you accept or reject the project?

If IRR<WACC, do you accept or reject the project?

True or False: IRR does not use all cashflows.

True or False: IRR uses Time Value of Money.

True or False: for an independent project, NPV and IRR always get the same accept/reject decision.

True or False: IRR is positively affected by early cashflows.

True or False: the Profitability Index is not affected by accounting into cashflows

True/False: IRR will change as the COC changes.

True or False: the Profitability Index is affected by time/value of cashflows.

True or False: ACC uses Time Value of Money.

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