M11-2 Matching Terminology Match each of the terms by inserting the appropriate definition letter in the space provided. Not all definitions will be used. Term 1. Compounding 2. Discounted cash flow methods 3. Discounting 4. Discount rate 5. Sensitivity analysis 6. Simple rate of return Definition A. How changing underlying assumptions affect decisions. B. The rate at which the current value of future cash flows is determined. C. The rate at which the current value of current cash flows is determined. Another term for the accounting rate of return. How much it costs the company to fund its projects. F. Methods that calculate the time it takes for a capital investment to pay for itself. G. Methods that incorporate the time value of money. H. Earning interest on principal. I. Finding the future value of cash flows. J. Finding the present value of future cash flows. K. Earning interest on interest. D. E.

M11-2 Matching Terminology Match each of the terms by inserting the appropriate definition letter in the space provided. Not all definitions will be used. Term Definition 1. Compounding 2. Discounted cash flow methods 3. Discounting 4. Discount rate 5. Sensitivity analysis 6. Simple rate of return A. How changing underlying assumptions affect decisions. B. The rate at which the current value of future cash flows is determined. C. The rate at which the current value of current cash flows is determined. D. Another term for the accounting rate of return. E. How much it costs the company to fund its projects. F. Methods that calculate the time it takes for a capital investment to pay for itself. G. Methods that incorporate the time value of money. H. Earning interest on principal. I. Finding the future value of cash flows. J. Finding the present value of future cash flows. K. Earning interest on interest