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Unformatted text preview: The University of Texas at Austin McCombs School of Business, Business Foundations Program ACC 310F: Foundations of Accounting, Fall 2010 Class Notes – Appendix A Source Document (from Chapter 1) Journal Entries (from Chapter 3) Time Value of Money • Future Value of $1 • Future Value of an Annuity of $1 • Present Value of $1 • Present Value of an Annuity of $1 Capital Budgeting (not in Textbook) • Outcome is uncertain. • Decision may be difficult or impossible to reverse. • Investment involves a long-term commitment • Large amounts of money are usually involved. Capital Budgeting Techniques • Initial investment Page 1 • Incremental operating cash flows • Terminal cash flow • Net present value (NPV) Capital Budgeting Your lemonade company is considering investing in the High Output Automatic Ice Maker; the machine costs $2,600 and you’ve estimated that it will increase net cash flows by $700 per year for 4 years at which time it will be sold for $250. Using an interest rate of 10% what is the net present value of the investment?Using an interest rate of 10% what is the net present value of the investment?...
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This note was uploaded on 03/28/2012 for the course ACC 310F taught by Professor Verduzco during the Fall '07 term at University of Texas.
- Fall '07