Capital Budgeting

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Joined: Sun Aug 04, 2013 4:56 am

Capital Budgeting

Postby Ravi » Wed Dec 17, 2014 8:01 pm

Basic Principle of Capital Budgeting-

Financing Costs ( Like Interest Rate) are not considered as a part of the cash flows because they already considered in project's hurdle rate.

Need more clear explanation with example. Example please

Finance Junkie
Posts: 704
Joined: Wed Apr 09, 2014 6:28 am

Capital Budgeting

Postby edupristine » Thu Dec 18, 2014 8:31 am

As if we are already including financing cost in project cost of capital so we don't include it again in project incremental cash flows because it will be double count.
Hence, for the correct measurement we should to include it in project cost of capital.

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