Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 30

Following are a number of key terms and concepts introduced in the chapter, along with a list of corresponding definitions. Match the appropriate letter for the key term or concept to each definition provided (items 1–15). Note that not all key terms and concepts will be used.

a. Differential cost	j. Present value
b. Allocated cost	k. Cost of capital
c. Sunk cost	l. Net present value (NPV)
d. Opportunity cost	m. Internal rate of return (IRR)
e. Relevant cost	n. Payback method
f. Full capacity	o. Accounting rate of return
g. Idle capacity	p. Profitability index
h. Capital budgeting	q. Postaudit
i. Cash flow	r. Outsourcing

_______A capital budgeting analytical technique that relates the present value of the returns (cash inflows) from an investment to the present value of the cost (cash outflows) of the investment, given a cost of capital.