I am doing an assignment where I have to make a mock financial sheet for a web-app/service but I am having trouble understanding some of the terms.

I was told by my professor that since this is a service the working capital impact can be marked as 0 and that is reflected in the sheet.

I am having problems understanding price and cost escalation, commissions, Discount Rate, Discount Factor, Discounted Cash Flow, Cumulative DCF, DCF - Excluding Prior Sunk Costs and Cash Flow, Internal Rate of Return

If someone could please show me the link between these terms I would greatly appreciate it. Also is price and cost escalation just the yearly interest rate? Thanks...

Return on Investment Model - Simplified Project Discounted Cash Flow Analysis Internal Rate Of Return Category 2021 2022 2023 2024 2025 2026 2027 2028 2025 2030 Totals Cash (Outflows) Development Expense $ (2,820) 5 (500) $ S S S S S S (3,320) Development Expense Capital Equipment (640) (400) (800) (1,840) Development Other Total Cash (Investment) Each Year (3,460) (500) (400) (800 (5,160) Working Capital Impact days (Incr)/Decr Accounts Receivable (CF) (Incr)/Decr Inventory (CF) Incr/(Decr) Accounts Payable (CF) Other Total Working Capital Impact on Cash Total Working Capital impact on Cash Each Year Total Cash (Outflow) (3,460) (500) (400) (800) Cash Inflow (Outflow) From Sales price & cost escalation 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Sales S 2,624 5 4,000 5 6,000 $8,000 $8,200 $8,405 $8,615 $8,831 $9,051 59,278 73,004 Cost of Goods Sold (1,680) (2,560) (3,840) (5,120) (5,248) (5,379) (5,514) (5,652) (5,793 (5,938) (46,723) Gross Profit 945 1,440 2,160 2,880 2,952 3,026 3,101 3,179 3,258 3.340 26,281 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% Other "Direct" Variable Costs Freight Commissions 2.5% (66 (100) (150) (200) (205) (210) (215) (221) (226) 232) Other Operating Income 879 1,340 2,010 2,680 2,747 2,816 2,886 2,958 3,032 3,108 24,456 Net Annual Cash Flow (2,581) 840 2.010 2,280 2,747 2,816 2,886 2,158 3,032 3,108 19,296 Cumulative Cash Flow 2,581) (1,741) 269 2.549 5,296 8,112 10,998 13,156 16,188 19,296 Discount Rate 15.0% Discount Factor 1.00 1.15 1.32 1.52 2.01 2.31 2.66 3.06 3.52 5.15 Discounted Cash Flow (2,581) 730 1,520 1,499 1,366 1,217 1,085 706 862 505 6,909 Cumulative DCF 2,581 (1,850) (330) 1,169 2,534 3,752 4,837 5,542 6,404 6,909 DCF - Excluding Prior Sunk Costs and Cash Flow $ 6,909 Internal Rate of Return 56.49%