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3 Cards in this Set
- Front
- Back
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Discount Rate
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A decimal value that allows money in future years to be converted into equivalent amounts in earlier years. One way of thinking about a discount rate is that for money you will receive in the future it specifies the "discount" you would accept to receive a lesser amount earlier. |
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Cost of Capital
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Another term for the discount rate. "Cost of capital" refers to the sources that a corporation uses to raise money for investments. A company's cost of capital is usually an average of the interest rate of borrowing money (debt) and the expected returns on company stock (equity). |
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Net Present Value |
The value in the present of a sum of money, in contrast to some future value it will have when it has been invested at compound interest. |
