Discounting Flashcards
1
Q
Why is time value of money important?
A
Inflation can change buying power and money can be reinvested over time to yield a return above inflation.
2
Q
discount rate?
A
Rate of interest deemed appropriate for converting value of money now to what it would be in the future.
3
Q
Taxes and subsidies
A
inducements for particular behaviour, including gov grants. Can affect the ROR.
4
Q
What are residual costs? When is there no residual value?
A
Value from salvage at the end of life of systems.
If analysis period = useful life
5
Q
Analysis period
A
Length of time where costs and benefits are evaluated in an economic evaluation.
6
Q
Useful life
A
Period where investment has some value
7
Q
Economic life
A
Period where investment is least cost way of meeting requirements.
