Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
| Accounting Break-Even | The sales level that results in zero project net income.
(See Refer to page 352)
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| Capital Rationing | The situation that exists if a firm has positive NPV projects but cannot find the necessary financing.
(See Refer to page 368)
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| Cash Break-even | The sales level where operating cash flow is equal to zero.
(See Refer to page 359)
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| Contingency Planning | Taking into account the managerial options implicit in a project.
(See Refer to page 365)
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| Degree of Operating Leverage | The percentage change in operating cash flow relative to the percentage change in quantity sold.
(See Refer to page 362)
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| Financial Break-even | The sales level that results in a zero NPV.
(See Refer to page 359)
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| Fixed Costs | Costs that do not change when the quantity of output changes during a particular time period.
(See Refer to page 351)
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| Forecasting Risk | The possibility that errors in projected cash flows lead to incorrect decisions.
(See Refer to page 344)
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| Hard Rationing | The situation that occurs when a business cannot raise financing for a project under any circumstances.
(See Refer to page 368)
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| Managerial Options | Opportunities that managers can exploit if certain things happen in the future.
(See Refer to page 364)
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| Marginal or Incremental Cost | The change in costs that occurs when there is a small change in output.
(See Refer to page 352)
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| Operating Leverage | The degree to which a firm or project relies on fixed costs.
(See Refer to page 360)
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| Scenario Analysis | The determination of what happens to NPV estimates when we ask what-if questions.
(See Refer to page 347)
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| Sensitivity Analysis | Investigation of what happens to NPV when only one variable is changed.
(See Refer to page 348)
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| Simulation Analysis | A combination of scenario and sensitivity analyses.
(See Refer to page 349)
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| Soft Rationing | The situation that occurs when units in a business are allocated a certain amount of financing for capital budgeting.
(See Refer to page 368)
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| Strategic Options | Options for future, related business products or strategies.
(See Refer to page 367)
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| Variable Costs | Costs that change when the quantity of output changes.
(See Refer to page 351)
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2002 McGraw-Hill Higher Education