Finance Terms and Discounted Cash Flow Analysis
Match the following finance terms with the solutions below. If none fit, indicate it.
A. The examination of differences among revenue, costs and cash flows under alternative courses of action.
B. A cost incurred in the past that cannot be changed as a result of future actions.
C. The process of planning and evaluating proposals for investments in plant assets.
D. The average annual net income from an investment expressed as a percentage of the average amount invested.
E. The length of time necessary to recover the entire cost of an investment from resulting annual net cash flows.
F. The present value of investments expected future cash flows.
G. The amount of money today that is considered equivalent to the cash flows expected to take place in the future.
H. The required rate of return used by an investor to discount future cash flows to their present value.
I. Often an investments final cash flows to be considered in discounted cash flow analysis.
NET PRESENT VALUE, DISCOUNT RATE, SUNK COST, CAPITAL BUDGET AUDIT, CAPITAL BUDGETING, PAYBACK PERIOD, SALVAGE VALUE, INCREMENTAL ANALYSIS, PRESENT VALUE, RETURN ON AVERAGE INVESTMENT
Solution Preview
NET PRESENT VALUE = G-The amount of money today that is considered equivalent to the cash flows expected to take place in the future.
DISCOUNT RATE = H-The required rate of return used by an investor to discount future cash flows to their present value.
SUNK COST = B- A cost incurred in the past that cannot be changed as a result of future actions. ...
Solution Summary
In the following posting, we match several finance terms with their respective definitions.