| incremental cash flows | The difference between a firm's future cash flows with a project and those without the project.
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| stand-alone principle | The assumption that evaluation of a project may be based on the project's incremental cash flows.
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| sunk cost | 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 | The most valuable alternative that is given up if a particular investment is undertaken.
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| erosion | 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 | Financial statements projecting future years' operations.
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| accelerated cost recovery system (ACRS) | 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 | The tax saving that results from the depreciation deduction, calculated as depreciation multiplied by the corporate tax rate.
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| equivalent annual cost (EAC) | The present value of a project's costs calculated on an annual basis.
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