Question

Company must choose which investments to pursue due to limited funds
	Computes the number of dollars returned for every dollar invested
	Process of deciding whether to invest in new equipment, new vehicles or new technology
	The length of time it takes to recover the cost of the capital outlay through net cash inflows
	The difference between the present value of the investment’s net cash inflows and the cost of the initial investment
	Minimum rate that an investment must earn in order to be acceptable
	Interest rate that makes the NPV of the investment equal to zero
	Means decision rule is to make investment
	Includes the initial investment in the equipment
	Interest Is earned only on the principal amount
	Future cash revenue generated, any future savings in operating costs and any future residual value
	Measures the average annual rate of return over the asset’s life
	Causes cash received sooner in time to be worth more than cash flows received later in time because money earns income over time
	Interest is earned on principle plus interest earned to date
	Series of equal installments made at equal time intervals

1.	Capital budgeting
2.	Cash inflows
3.	Cash outflows
4.	Capital rationing
5.	Payback period
6.	Accounting rate of return
7.	Time value of money
8.	Annuity
9.	Compound interest
10.	Net present value
11.	Discount rate
12.	Investment with a positive net present value
13.	Internal rate of return
14.	Profitability index
15.	Simple interest

Answer 1

The correct match is as follows:

1.	Capital budgeting - Process of deciding whether to invest in new equipment, new vehicles or new technology
2.	Cash inflows - Future cash revenue generated, any future savings in operating costs and any future residual value
3.	Cash outflows - Includes the initial investment in the equipment
4.	Capital rationing - Company must choose which investments to pursue due to limited funds
5.	Payback period - The length of time it takes to recover the cost of the capital outlay through net cash inflows
6.	Accounting rate of return - Measures the average annual rate of return over the asset’s life
7.	Time value of money - Causes cash received sooner in time to be worth more than cash flows received later in time because money earns income over time
8.	Annuity - Series of equal installments made at equal time intervals
9.	Compound interest - Interest is earned on principle plus interest earned to date
10.	Net present value - The difference between the present value of the investment’s net cash inflows and the cost of the initial investment
11.	Discount rate - Minimum rate that an investment must earn in order to be acceptable
12.	Investment with a positive net present value - Means decision rule is to make investment
13.	Internal rate of return - Interest rate that makes the NPV of the investment equal to zero
14.	Profitability index- Computes the number of dollars returned for every dollar invested
15.	Simple interest - Interest Is earned only on the principal amount