Finance Final

Sunk cost.

A cost that has already been paid, or the liability to pay has already been incurred, is a(n):

Mutually exclusive investment decisions.

A situation in which taking one investment prevents the taking of another is called:

internal rate of return

To find the _____________ we begin by setting the NPV of a project equal to zero.

Capital Budgeting

Helps firms decide which assets to buy and which projects to undertake

is equal to zero when the discount rate used is equal to the IRR

Net present value_____?

Erosion costs.

The cash flows of a new project that come at the expense of a firm's existing projects are:

Stand-alone principle.

The evaluation of a project based solely on its incremental cash flows is the basis of the:

Payback period

The length of time required for an investment to generate cash flows sufficient to recover its initial cost is the:

Opportunity cost.

The most valuable investment given up if an alternative investment is chosen is a(n):

An investment should be accepted if the NPV is positive and rejected if it is negative.

The net present value (NPV) rule can be best stated as

Payback period

Which of the following methods does not involve an interest rate from any source?