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17 Cards in this Set
- Front
- Back
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What is capital budgeting?
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how to spend capital
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What is a cash flow?
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- any cash in or cash flow out
-most difficult part of the project |
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Should overhead cost be incorporated?
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-only if they change when introducing a new project
-and if they are truly incremental |
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What kind of finance costs should be ignored?
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interest expense
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How do most firms make money?
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not by selling investments
-make money by charging client fees -producing products to make money |
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How is depreciable value calculated?
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purchase price + shipping and installation charges
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What do we do with salvage value?
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Since using tax accounting you do not subtract salve value
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How do you calculate book value?
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initial cost of machine - accumulated depreciation
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What constitutes a capital gain?
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if sale price is larger than book value
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What constitutes a capital loss?
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if the sale price is less than book value
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How is depreciable value calculated?
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purchase price + shipping and installation charges
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What do we do with salvage value?
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Since using tax accounting you do not subtract salve value
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How do you calculate book value?
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initial cost of machine - accumulated depreciation
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What constitutes a capital gain?
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if sale price is larger than book value
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What constitutes a capital loss?
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if the sale price is less than book value
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What is another term for a project?
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a investment or a long term asset
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4 reasons for importance of Capital Budgeting?
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-Increase shareholder wealth
-Bad Investment could cost the company -Budgeting Process- Short Term -Sufficient Money in the long term |
