SUSTAINING CAPITAL REINVESTMENT Definition

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SUSTAINING CAPITAL REINVESTMENT is the periodic capital outlay required to maintain operations at existing levels, net of the tax shield available from such outlays.

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FUNDED DEPRECIATION ACCOUNT is a reserve setup to cover the replacement cost of those capital assets covered within the depreciation schedule.

HURDLE RATE is a term used in the budgeting of capital expenditures meaning the REQUIRED RATE OF RETURN in a DISCOUNTED CASH FLOW analysis. If the expected rate of return on an investment is below the hurdle rate, the project is not undertaken. The hurdle rate should be equal to the INCREMENTAL COST OF CAPITAL.

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