Response to the following problem:
Define each of the following terms:
a. Cash flow; accounting income
b. Incremental cash flow; sunk cost; opportunity cost
c. Net operating working capital changes; salvage value
d. Real rate of return, rr, versus nominal rate of return,
e. Sensitivity analysis; scenario analysis; Monte Carlo simulation analysis
f. Risk-adjusted discount rate; project cost of capital
g. Real options; managerial options; strategic options; embedded options
h. Investment timing option; growth option; abandonment option; flexibility option.