Chapter 12 Example

Chapter 12 Example - Chapter 12 cheat sheet and examples...

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Methods of evaluating capital investments 1. Payback Method:   Cost/ Annual NET inflow = payback period   Generally speaking, you should choose the alternative w/ the shorter payback time but  this ignores the time value of money and the length of life. 2. Simple Rate of Return:   Increase in future net income/ initial cost This method will give a rate of return that you can compare to your required rate of  return but also ignores the time value of money 3.  Net Present Value Method:  compare the present value of the inflows to the present  value of the outflows and if the inflows are more than the outflows, you should do it as  you are making your required rate of return.  If the outflows are more, you shouldn’t do it  b/c you are not meeting your required rate of return. 4. Least Cost Decisions: 
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This note was uploaded on 07/02/2011 for the course ACCT 226 taught by Professor Smith during the Spring '10 term at South Carolina.

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Chapter 12 Example - Chapter 12 cheat sheet and examples...

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