| forecasting risk | The possibility that errors in projected cash flows will lead to incorrect decisions. Also, estimation risk.
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| scenario analysis | The determination of what happens to NPV estimates when we ask what-if questions.
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| simulation analysis | A combination of scenario and sensitivity analysis.
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| variable costs | Costs that change when the quantity of output changes.
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| fixed costs | Costs that do not change when the quantity of output changes during a particular time period.
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| marginal, or incremental, cost | The change in costs that occurs when there is a small change in output.
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| accounting break-even | The sales level that results in zero project net income.
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| marginal, or incremental, revenue | The change in revenue that occurs when there is a small change in output.
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| cash break-even | The sales level that results in a zero operating cash flow.
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| financial break-even | The sales level that results in a zero NPV.
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| degree of operating leverage (DOL) | The percentage change in operating cash flow relative to the percentage change in quantity sold.
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| capital rationing | The situation that exists if a firm has positive NPV projects but cannot find the necessary financing.
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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.
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| hard rationing | The situation that occurs when a business cannot raise financing for a project under any circumstances.
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