Ch. 11 Capital Budgeting Flashcard

Front

What is the primary purpose of capital budgeting?

Back

To make decisions about investments in major capital assets

Front

Which of the following is NOT typically considered in the capital budgeting process?
Plant Expansions, Equipment Replacement, Employee Training, Cost Reduction

Back

Employee Training

Front

What are the two main types of capital investment decisions?

Back

Screening Decisions and Ranking Decisions

Front

What is the purpose of screening decisions in capital investment?

Back

To determine if a proposed investment is acceptable

Front

What do ranking decisions attempt to do in capital investment?

Back

Rank acceptable alternatives from most appealing to least appealing

Front

What are the two categories of capital budgeting decisions?

Back

Independent Projects and Mutually-Exclusive Projects

Front

What is true about independent projects in capital budgeting?

Back

They are unrelated to each other.

Front

What happens when a mutually-exclusive project is accepted?

Back

It leads to rejection of other projects.

Front

Which of the following is a non-discounting method of capital budgeting?
Net Present Value, Internal Rate of Return, Discounted Payback Period

Back

Accounting Rate of Return

Front

What is the basis for the Accounting Rate of Return method in capital budgeting?

Back

Net Income