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CHART

TASK

FEBRUARY

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MARCH

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4

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APRIL

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Projects

Introduction

Discussion with

Supervisor about

project

Project title

selection

Project Research

Objectives

Review Literature

Work

Review literature

Finding additional

information and

knowledge about

project

Methodology

Feasibility study

Research the

detail about

project

Research the

method that use

Complete the

final report

Presentation for

the project

on the average capital investment over the life of a capital

project; computed as average annual profits divided by average

investment; not based on cash flow

per period

Annuity due: a series of equal cash flows received or paid at the

beginning of a period

Capital asset: an asset used to generate revenues or cost

savings by providing production, distribution, or service

capabilities for more than one year

Capital budgeting: the evaluation of future long-range projects

or courses of activity in order to allocate limited resources

effectively and efficiently

Cash flow: the receipt or disbursement of cash; in capital

budgeting, it refers to cash flows that arise from the purchase,

operation, and disposition of a capital asset

Compound interest: a method of determining interest in which

interest that was earned in prior periods is added to the original

investment so that, in each successive period, interest is earned

on both principal and interest

Compounding period: the time between each interest

computation

Cost of capital (COC): the weighted average cost of the various

sources of funds (debt and equity) that compose a firms

financial structure

Discounting: the process of reducing future cash flows to

present value amounts by removing the portion of the future

values representing interest

Discount rate: the rate of return used to discount future cash

flows to their present value amounts; it should equal or exceed an

organizations weighted average cost of capital

Financing decision: a judgment regarding the method of raising

capital to fund an investment

Future value (FV): the amount to which one or more sums of

money invested at a specified interest rate will grow over a

specified number of time periods

return on investment; it should generally be at least equal to the

cost of capital; the hurdle rate is commonly the discount rate

used in computing net present value amounts

Independent project: an investment project that has no specific

bearing on any other investment project

Internal rate of return (IRR): the discount rate that causes the

present value of the net cash inflows to equal the present value of

the net cash outflows

Investment decision: a judgment about which assets will be

acquired by an entity to achieve its stated objectives

Judgmental method (of risk adjustment): method in which

decision makers use logic and reasoning to decide whether a

project provides an acceptable rate of return in relation to its risk

Mutually exclusive projects: projects that fulfill the same

function; one project will be chosen from such a group, excluding

all others from further consideration because they would provide

unneeded or redundant capability

Mutually inclusive projects: a set of proposed capital projects

that are all related; if the primary project is chosen, all related

projects are also selected

Net present value (NPV): the difference between the present

values of all cash inflows and outflows for an investment project

Net present value method: a process that uses the discounted

cash flows of a project to determine whether the rate of return on

that project is equal to, higher than, or lower than the desired rate

of return

Ordinary annuity: a series of equal cash flows received or paid

at the end of a period

Payback period: measures the time required for a projects

cash inflows to equal the original investment

Postinvestment audit: the process of gathering information on

the actual results of a capital project and comparing them to the

expected results

according to their impact on the achievement of company

objectives

Present value (PV): the amount that one or more future cash

flows is worth currently, given a specified rate of interest

Profitability index (PI): a ratio that compares the present value

of net cash flows to the present value of the net investment

Reinvestment assumption: an assumption made about the

rates of return that will be earned by intermediate cash flows from

a capital project; NPV and PI assume reinvestment at the discount

rate; IRR assumes reinvestment at the IRR

Return of capital: the recovery of the original investment (or

principal) by a project

Return on capital: income equal to the rate of return multiplied

by the amount of the investment

Risk: uncertainty reflecting the possibility of differences between

the expected and actual future returns from an investment

Risk-adjusted discount rate method: a formal method of

adjusting for risk in which the decision maker increases the rate

used for discounting the future cash inflows and decreases the

rate used for discounting future cash outflows to compensate for

increased risk

Screening decision: determines whether a capital project is

desirable based on some previously established minimum

criterion or criteria

Sensitivity analysis: a process of determining the amount of

change that must occur in a variable before a different decision

would be made

Simple interest: a method of determining interest in which

interest is earned on only the original investment (or principal)

amount

Tax benefit (of depreciation): the amount of depreciation

deductible for tax purposes multiplied by the tax rate; the

reduction in taxes caused by the deductibility of depreciation

deductible for tax purposes; the amount of revenue shielded from

taxes because of the depreciation deduction

Time line: a representation of the amounts and timing of all cash

inflows and outflows used in analyzing cash flow from a capital

project

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