Terminology

• Cash Flows: In business investments, this refers to the streams of cash that are expected to be received or paid out over the lifetime of the investment.
• Cash Inflow: This is the money expected to be received from the investment.
• Cash Outflow: This represents the expenditures or costs associated with maintaining and operating the business or making an investment.
• Discounted Cash Flow (DCF): a method to find the discounted value of the expected future cash flows from investing in a project to determine their present value on a focal date to evaluate the investment option.
• Net Present Value (NPV): a method of evaluating the feasibility of an investment decision by determining the difference between the present value of all cash inflows (returns) and the present value of all cash outflows (investment outlays).
• Required Rate of Return: This rate represents the expected yield on an investment, taking into account both the risk involved and the time value of money.

Glossary of Symbols

Annuity and Compound

• I/Y: Nominal interest Rate per year (%)
• C/Y: Frequency of compounding period per year
• i: Interest rate per compounding period (%)
• t: Term of annuity (in years)
• N: Total number of payments/compounding periods in the term
• PMT: the amount of periodic payment ($)
• P/Y: Number of payments per year
• PV: Present value of an annuity ($)
• FV: Future (maturity) value of an annuity ($)
• I: Interest Amount ($)