Class Notes Chapter 16 Part 2 and Appendix to Chapter 6 -...

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The University of Texas at AustinMcCombs School of Business, Business Foundations ProgramACC 310F: Foundations of AccountingClass Notes – Chapter 16 Part 2 and Appendix to Chapter 6Source Document (from Chapter 4 and 6)Today- $5,000X 0.12 =6001 year- $5,600X 0.12 =672Year 2- $6,272Time Value of MoneyFuture Value of $1Present Value of $1Future Value of an Annuity of $1Present Value of an Annuity of $1Time Value of Money CalculationsFuture Value of $1PV x FV factor = FVPresent Value of $1FV x PV factor = PVFuture Value of an Annuity of $1Annuity Amount x FVa factor = FVaPresent Value of an Annuity of $1Annuity Amount x PVa factor = PVaPage1
Capital BudgetingOutcome is uncertain.Decision may be difficult or impossible to reverse.Investment involves a long-term commitmentLarge amounts of money are usually involved.Capital Budgeting TechniquesInitial investmentIncremental operating cash flowsTerminal cash flowNet present value (NPV)Internal rate of return (IRR)Payback

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