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Descriptions This value is calculated by summing a project's expected annual cash inflows until their cumulative value equals the projects initial cost. The reliability of

Descriptions This value is calculated by summing a project's expected annual cash inflows until their cumulative value equals the projects initial cost. The reliability of this capital budgeting technique is diminished when applied to projects exhibiting unconventional cash flows. The decision rule for this capital budgeting method states a project should be considered acceptable if its calculated return is greater than or equal to the firm's required rate of return. A capital budgeting analysis that determines if a capital asset should be purchased to take the place of a worn out, damaged, or obsolete existing asset. The acceptance or rejection decision made for this type of project does not affect the acceptance or rejection of another proposed capital project. Terms

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