Term:
IRR - Internal Rate of Return, pg 407
Definition:
Capital Budgeting Technique. Discount rate equating the NPV, net present value to $0 to show the rate of return the firm will earn if it invests in the project and receives the given cash flows. Accept-reject decisions: If IRR is less than the cost of capital, accept the project. If IRR is greater then the cost of capital, reject the project. IRR = sum of (CFt / (1+
Term:
Leverage, pg 514
Definition:
the effect that fixed costs (costs which must be paid in order to operate regardless of sales or profits), have on shareholder returns. Managers can influence leverage by managing fixed and variable costs, and choosing a capital structure that mixes long-term debt and equity.