Match the Items Below by Entering the Appropriate Code Letter

question 102

Short Answer

Match the items below by entering the appropriate code letter in the space provided.
A. Profitability index E. Annual rate of return method
B. Internal rate of return method F. Cash payback technique
C. Discounted cash flow techniques G. Cost of capital
D. Capital budgeting H. Net present value method
____ 1. A capital budgeting technique that identifies the time period required to recover the cost of a capital investment from the annual cash inflow produced by the investment.
____ 2. Capital budgeting techniques that consider both the estimated total cash inflows from the investment and the time value of money.
____ 3. A method used in capital budgeting in which cash inflows are discounted to their present value and then compared to the capital outlay required by the capital investment.
____ 4. A method of comparing alternative projects that takes into account both the size of the investment and its discounted cash flows.
____ 5. A method used in capital budgeting that results in finding the interest yield of the potential investment.
____ 6. The average rate of return that the firm must pay to obtain borrowed and equity funds.
____ 7. The determination of the profitability of a capital expenditure by dividing expected annual net income by the average investment.
____ 8. The process of making capital expenditure decisions in business.

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Definitions:

Bushels

A unit of volume that is commonly used in agriculture for measuring quantities of grain, fruit, and other dry commodities.

Consume

The use of goods and services by households or individuals, typically referring to the act of buying and using products.

Harvest

The process of gathering mature crops from the fields.

Grain

Small, hard seeds, especially the seeds of various food plants such as wheat, corn, rye, oats, and barley.