| erosion | Cash-flow amount transferred to a new project from customers and sales of other products of the firm.
|
 |
|
|
| net working capital | Current assets minus current liabilities.
|
|
|
|
| nominal cash flow | A cash flow expressed in nominal terms if the actual dollars to be received (or paid out) are given.
|
|
|
|
| nominal interest rate | Interest rate unadjusted for inflation.
|
|
|
|
| opportunity cost | Most valuable alternative that is given up. The rate of return used in NPV computation is an opportunity interest rate.
|
|
|
|
| real cash flow | A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given.
|
|
|
|
| real interest rate | Interest rate expressed in terms of real goods; that is, the nominal interest rate minus the expected inflation rate.
|
|
|
|
| sunk cost | A cost that has already occurred and cannot be removed. Because sunk costs are in the past, such costs should be ignored when deciding whether to accept or reject a project.
|