Across
- 2. period The length of time necessary to recover the cost of an investment through the cash flows generated by that investment. Payback period is one criterion used in making capital budgeting decisions.
- 3. cash flows The present value of future cash flows.
- 5. value The amount of money today that is considered equivalent to a cash inflow or outflow expected to take place in the future. The present value of money is always less than its future amount, since money on hand today can be invested to become the equivalent of a larger amount in the future.
- 6. on average investment The average annual net income from an investment expressed as a percentage of the average amount invested. Return on average investment is one method of ranking alternative investment proposals according to their profitability.
- 7. present value The excess of the present value of the net cash flows expected from an investment over the amount to be invested. Net present value is one method of ranking alternative investment proposals.
Down
- 1. investments Large capital expenditures that typically involve the purchase of plant assets.
- 3. rate The minimum required rate of return used by an investor to discount future cash flows to their present value.
- 4. cost A cost that has been incurred irrevocably by past actions. Sunk costs are irrelevant to decisions regarding future actions.