Annual operating cost  Estimated annual costs to maintain and support an alternative.




Book value  Remaining capital investment in an asset after depreciation is accounted for.




Breakeven point  Quantity at which revenues and costs are equal, or two alternatives are equivalent.




Capitalized cost  Present worth of an alternative that will last forever (or a long time).




Capital recovery  Equivalent annual cost of owning an asset plus the required return on the initial investment.




Cash flow  Actual cash amounts which are receipts (inflow) and disbursements (outflow).




Cost estimating relationships  Relations that use design variables and changing costs over time to estimate current and future costs.




Cost of capital  Interest rate paid for the use of capital funds; includes both debt and equity funds. For debt and equity considered, it is weighted average cost of capital.




Depreciation  Reduction in the value of assets using specific models and rules; there are book and tax depreciation methods.




Future amount or worth  Amount at some future date considering time value of money.




Gross income  Income from all sources for corporations or individuals.




Inflation rate  Rate that reflects changes in the value of a currency over time.




Interest rate  Interest expressed as a percentage of the original amount per time period; nominal and effective rates.




Life (estimated)  Number of years or periods over which an alternative or asset will be used; the evaluation time.




Minimum attractive rate of return  Minimum value of the rate of return for an alternative to be financially viable.




Net cash flow  Resulting, actual amount of cash that flows in or out during a time period.




Net present value  Another name for the present worth.




Payback period  Number of years to recover the initial investment and a stated rate of return.




Present amount or worth  Amount of money at the current time or a time denoted as present.




Rate of return  Compound interest rate on unpaid or unrecovered balances such that the final amount results in a zero balance.




Recovery period  Number of years to completely depreciate an asset.




Salvage value  Expected tradein or market value when an asset is traded or disposed of.




Taxable income  Amount upon which income taxes are based.




Tax rate  Decimal rate, usually graduated, used to calculate corporate or individual taxes.
