- accounting rate of return (ARR)
- return on investment considering changes to net income

- alternatives
- options available for investment

- annuities due
- equal installments paid at the beginning of each payment period within the series

- annuity
- series of equal payments made over time

- capital investment
- company’s contribution of funds toward long-term assets for further growth; also called
*capital budgeting*

- cash flow
- cash receipts and cash disbursements as a result of business activity

- cash inflow
- money received or cost savings from a capital investment

- cash outflow
- money paid or increased cost expenditures from capital investment

- compounding
- earning interest on previous interest earned, along with the interest earned on the original investment

- discounted cash flow model
- assigns a value to a business opportunity using time-value measurement tools

- discounting
- process that determines the present value of a single payment or stream of payments to be received

- future value (FV)
- value of an investment after a certain period of time

- hurdle rate
- minimum required rate of return on an investment to consider an alternative for further evaluation

- internal rate of return method (IRR)
- calculation to determine profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero

- lump sum
- one-time payment or repayment of funds at a particular point in time

- net present value method (NPV)
- discounts future cash flows to their present value at the expected rate of return, and compares that to the initial investment

- non-time value methods
- analysis that does not consider the comparison value of a dollar today to a dollar in the future

- operating expenses
- daily operational costs not associated with the direct selling of products or services

- ordinary annuities
- equal installments paid at the end of each payment period within the series

- payback method (PM)
- calculation of the length of time it takes a company to recoup their initial investment

- preference decision
- process of comparing potential projects that meet screening decision criteria, and will rank order of importance, feasibility, and desirability to differentiate among alternatives

- present value (PV)
- future value of an investment expressed in today’s value

- screening decision
- process of removing alternatives from the decision-making process that would be less desirable to pursue given their inability to meet basic standards

- time value of money
- assertion that the value of a dollar today is worth more than the value of a dollar in the future