Examlex
According to an official statement of the American Anthropological Association,
Abandonment Option
A form of real option in capital budgeting, giving a company the ability to abandon or terminate a project during its life if it becomes unprofitable.
Discount Rate
A rate of interest utilized within discounted cash flow evaluations to ascertain the present worth of forthcoming cash flows.
Decision Tree
A timeline representation used in planning projects subject to multiple outcomes. Wherever an event has several outcomes, the timeline branches into as many paths, each with a probability. The result is a proliferation of possible paths to completion, each representing an outcome, its financial implication, and its probability. Hence, the decision tree specifies a probability distribution for the project’s overall financial outcome.
NPV Profile
A graphical representation showing the relationship between the Net Present Value (NPV) of a project and various discount rates.
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