Answer:
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.