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9 Cards in this Set
- Front
- Back
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Incremental cash flows
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The difference between a firm's future cash flows with a project and those without the project.
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Stand-alone principle
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The assumption that evaluation of a project may be based on the project's incremental cash flows.
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Sunk cost
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A cost that has already been incurred and cannot be removed and therefore should not be considered in an investment decision.
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Opportunity cost
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The most valuable alternative that is given up if a particular investment is undertaken.
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Erosion
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The cash flows of a new project that come at the expense of a firm's existing projects.
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Pro forma financial statements
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Financial statements projecting future years' operations.
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Accelerated cost recovery system (ACRS)
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A depreciation method under U.S. tax law allowing for the accelerated write-off of property under various classifications.
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Depreciation tax shield
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The tax aving that results from the depreciation deduction, calculated as depreciation multiplied by the corporate tax rate.
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Equivalent annual cost (EAC)
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The present value of a project's costs calculated on an annual basis.
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