| net present value (NPV) | The difference between an investment's market value and its cost.
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| discounted cash flow (DCF) valuation | The process of valuing an investment by discounting its future cash flows.
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| payback period | The amount of time required for an investment to generate cash flows sufficient to recover its initial cost.
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| discounted payback period | The length of time required for an investment's discounted cash flows to equal its initial cost.
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| average accounting return (AAR) | An investment's average net income divided by its average book value.
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| internal rate of return (IRR) | The discount rate that makes the NPV of an investment zero.
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| net present value profile | A graphical representation of the relationship between an investment's NPVs and various discount rates.
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| multiple rates of return | The possibility that more than one discount rate will make the NPV of an investment zero.
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| mutually exclusive investment decisions | A situation in which taking one investment prevents the taking of another.
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| profitability index (PI) | The present value of an investment's future cash flows divided by its initial cost. Also, benefit-cost ratio
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