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Match the Following Definitions with the Appropriate Term

Question 189

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Match the following definitions with the appropriate term

Premises:
A cost that requires a future outlay of cash and is relevant for current and future decision making.
A series of cash flows of equal dollar amount over equal time periods.
An estimate of an asset's value to the company; computed by discounting the future net cash flows from the investment the project's required rate of return and then subtracting the initial amount invested.
A cost that cannot be avoided or changed because it arises from past decision; irrelevant to future decisions.
An additional cost incurred if a company pursues a certain course of action.
The potential benefits lost by taking a specific action when two or more alternative choices are available.
Responses:
Sunk cost
Opportunity cost
Out-of-pocket cost
Net present value
Incremental cost
Annuity

Correct Answer:

A cost that requires a future outlay of cash and is relevant for current and future decision making.
A series of cash flows of equal dollar amount over equal time periods.
An estimate of an asset's value to the company; computed by discounting the future net cash flows from the investment the project's required rate of return and then subtracting the initial amount invested.
A cost that cannot be avoided or changed because it arises from past decision; irrelevant to future decisions.
An additional cost incurred if a company pursues a certain course of action.
The potential benefits lost by taking a specific action when two or more alternative choices are available.
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