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Accrual Accounting Rate of Return
Divides an accrual accounting measure of average annual income of a project by an accrual accounting measure of its investment.
Discounted Cash Flow (DCF) Methods
Capital budgeting methods that measure all expected future cash inflows and outflows of a project as if they occurred at a single point in time.
Internal Rate of Return (IRR) Method
Capital budgeting discounted cash flow (DCF) method that calculates the discount rate at which the present value of expected cash inflows from a projects equals the present value of its expected cash outflows.
Net Present Value (NPV) Method
Capital budgeting discounted cash flow (DCF) method the calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time, using the required rate of return.
Nominal Rate of Return
Made up of three elements: a.) the risk-free element when there is no expected inflation, b.) a business-risk element, and c.) an inflation element.
Capital budgeting method that measures the time it will take to recoup, in the form of expected future cash flows, the net initial investment in the project.
Real Rate of Return
The rate of return demanded to cover investment risk (with no inflation). It has a risk-free element and a business-risk element.
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