NPV

Question 1

What 4 cashflows should NOT be included in an NPV calculation?

Answer 1

1. Sunk costs
2. Existing fixed costs
3. Non-cash flows (e.g depreciation as cost of asset is included at the start of the calc year 0)
4. Any financing cash flows (such as loan payments or interest payments) - this is included in the discouting process

Question 2

What

What 6 cashflows SHOULD be included in an NPV calculation?

Answer 2

1. Any savings
2. Residual value/scrap vaue of any assets
3. Changes in working capital
4. Opportunity costs
5. Any EXTRA fixed costs
6. Tax