Define each of the following terms: a. Capital budgeting; regular payback period; discounted payback period b. Independent

Question:

Define each of the following terms:

a. Capital budgeting; regular payback period; discounted payback period

b. Independent projects; mutually exclusive projects

c. DCF techniques; net present value (NPV) method; internal rate of return (IRR) method

d. Modified internal rate of return (MIRR) method; profitability index

e. NPV profile; crossover rate

f. Non-normal cash flow projects; normal cash flow projects; multiple IRRs

g. Hurdle rate; reinvestment rate assumption; post-audit

h. Replacement chain; economic life; capital rationing

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...