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Principles of Finance

Key Terms

Principles of FinanceKey Terms
capital investment
a major expenditure that requires a large up-front investment and is expected to generate substantial cash inflow in return
cash flow
the amount of cash actually flowing into and out of a business, as opposed to income (which is based on accounting rules, accruals, and reports)
future value
the value of an asset or holding at a point in the future based on expectations of that asset’s growth at a certain rate of return
mixed stream
a set of cash flows over a period of time that can vary in amount from one period to the next
present value
the value of an asset in today’s dollars based on future growth expectations at an assumed interest rate
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