1. cash flow 2. payback period 3. modified accelerated cost recovery system depreciation (MACRS) 4. planning horizon 5. normal recovery period 6. reinvestment assumption 7. internal rate of return (IRR) 8. capital rationing 9. net present value profile

1). Cash flow: Equals cash inflows minus cash expenses.

2). Payback period: Indicates the length of time required to recoup an initial investment.

3). Modified accelerated cost recovery system depreciation (MACRS): Has defined asset lives of 3 to 39 years for different categories of assets.

4). Planing horizon: A graphical presentation of the potential net present values of a project at different discount rates.

5). Normal Recovery period: The time it takes to depreciate an asset under the accelerated cost recovery system.

6). Reinvestment assumption: Concerns the rate of return that can be earned on the cash flow generated by capital budgeting projects.

7). Internal rate of return (IRR): A discounted cash flow method for evaluating capital budgeting projects where the present value of the cash inflows are equal to the present value of the cash outflows.

8). Capital rationing: Occurs when a corporation has more dollars of capital budgeting projects with positive net present values than it has money allocated to invest in them.

9). Net present value profile: Equals the present value of the cash inflows minus the present value of the cash outflows when the cost of capital is used as a discount rate.

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