TAILIEUCHUNG - Lecture Survey of accounting (4/e) - Chapter 16: Planning for capital investments

After studying this chapter you will be able to: Explain the time value of money concept, determine and interpret the net present value of an investment opportunity, determine and interpret the internal rate of return of an investment opportunity, evaluate investment opportunities using the payback method and the unadjusted rate of return. | Chapter Sixteen Planning for Capital Investments © 2015 McGraw-Hill Education. 1 Capital Investment Decisions Purchases of long-term operational assets are capital investments. Once a company purchases operational assets, it is committed to these investments for an extended period of time. Understanding the time value of money concept will help you make rational capital investment decisions. 16-2 2 Time Value of Money This concept recognizes that the value of a dollar received in the future is less than today’s dollar. The further into the future the receipt is expected to occur, the smaller its present value. When a company invests in capital assets, it sacrifices present dollars in exchange for the opportunity to receive future dollars. 16-3 3 Minimum Rate of Return Most companies consider the cost of capital to be the minimum expected return on investment opportunities. Creditors expect interest payments; in most companies, owners expect dividends and increased stock value. The .

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• Survey of accounting
• Lecture Survey of accounting
• Capital investments
• Planning for capital investments
• Reinvestment assumption
• Internal rate of return
• Accounting for cash
• Accounting cycle
• Financial resources
• Accounting provides information
• Internal controls
• Accounting profession
• Accounting for receivables
• Inventory cost flow
• Accounting for liabilities
• Bonds issued
• Managerial accounting
• Product costing
• Financial statements
• Ledger accounts
• Merchandising businesses
• Transportation costs
• Long term operational assets
• Depreciation method