Appendix C: Glossary of Economic Terms

benefit: An incoming (positive) cash flow.
benefit decline factor (BDF): Fractional year-to-year decline in benefits, incorporated into estimate to allow for effects of unforeseen events.
contingency factor: Fraction of initial optimistic cost estimate added on to cover unexpected costs.
control performance: A measure of how well a control system meets its objective, typically expressed as some function of deviation from target (e.g., range, standard error). Contrast with process performance, economic performance.
cost: An outgoing (negative) cash flow.
decision tree: A method for displaying the effect of choices during a project or among projects.
discount factor: The value by which a future cash flow must be multiplied to convert it into a present cash flow.
economic performance: A measure of how well a plant or unit meets its objective, expressed in financial terms (e.g., ROI). Contrast with process performance, control performance.
first cost: Initial investment in a project, before operation starts and benefits are realized.
fixed cost: Any cost that does not vary with production rate.
internal rate of return (IRR): The rate of return that will set net present value = 0.
market limited: If the output of a production facility is limited by the amount of its product that can be profitably sold, it is said to be market limited. Contrast with production limited.
net cash flow: The algebraic sum of positive and negative cash flows.
net present value (NPV): The current value of future cash flow(s).
opportunity cost: Income that could be earned by...

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Automation and Control Systems Economics, 2nd Edition

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Appendix C: Glossary of Economic Terms

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