Chapter 21-Study Information

Chapter 21-Study Information - This includes its advantages...

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Accounting 230 Chapter 21 Study Information Horngren 13 th Ed. 1. You should be able to define the following terms: capital budgeting, depreciation tax shield as an inflow when there is a tax rate, working capital, and salvage value. 2. You should know some of the typical inflows and outflows related to capital budgeting problems. 3. You should know that not all inflows and outflows are taxable items. Investments and return of investments are not taxable items. The general rule to put a taxable item on an after-tax basis is: taxable inflow/outflow X (1-tax rate). The exception to the general rule is for the depreciation tax shield computation and gains/losses where you put depreciation expense, gains, and losses on an after-tax basis by: depreciation expense X tax rate directly. 4. You should be able to understand and use the net present value method.
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Unformatted text preview: This includes its advantages and disadvantages, as well as, with and without a tax rate. 5. You should be able to understand and use the internal rate of return method. This includes its advantages and disadvantages, as well as, with and without a tax rate. 6. You should be able to understand and use the payback method. This includes its advantages and disadvantages, as well as, with and without a tax rate. 7. You should be able to understand and use the accrual accounting rate of return method. This includes its advantages and disadvantages, as well as, with and without a tax rate. 8. You should be able to work with uniform and uneven inflows in using the above 4 methods. 9. You should be able to identify if a project is acceptable or should be rejected for the NPV method and the IRR method....
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This note was uploaded on 04/14/2009 for the course ACC 230 taught by Professor Jones during the Spring '08 term at Illinois State.

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