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Explanation of some of the terms used:-
Benefit-Cost Ratio (BCR) : An indicator used in cost-benefit analysis that attempts to summarize the overall value for money of a project. It is the ratio of the benefits of a project relative to its costs, being expressed in discounted present values.
Capital Recovery Factor : Rate of recovery of the bank loan over its tenure.
Cash Flow : A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing. Cash outflows result from expenses or investments.
Discount Factor (DF) : A factor that, when multiplied by a particular year's predicted cash flow, brings the cash flow to a present value. The factor takes into consideration the number of years from the inception of the project and the hurdle rate that the project is expected to earn before it can be regarded as feasible.
Internal Rate of Return (IRR) : The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project.
Net Present Worth (NPW) : The difference between the present worth of all cash inflows and outflows of a project. Since all cash flows are discounted to the present, the NPW method is also known as the discounted cash flow technique.
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