62 Appendix 3: Glossary of terms Appendices Net present value: Net cash flow discounted to the present. All future cash flows are collapsed into one number, which, if positive, indicates feasibility. The result is expressed as a monetary measure. Non-labor income: Income received from investments, such as rent, interest, and dividends. Opportunity cost: Benefits foregone from alternative B once a decision is made to allocate resources to alternative A. Or, if individuals choose to attend college, they forego earnings that they would have received had they chose instead to work full-time. Foregone earnings, therefore, are the “price tag” of choosing to attend college. Payback period: Length of time required to recover an investment. The shorter the period, the more attractive the investment. The formula for computing payback period is: Payback period = cost of investment/net return per period
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