If we included financing costs in the cash flows we would be [...] the financing costs.
cause thy're included in the discount rate,
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Open it If we included financing costs in the cash flows and in the discount rate, we would be double-counting the financing costs.
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3. BASIC PRINCIPLES OF CAPITAL BUDGETING t result from a capital investment. Then, these after-tax cash flows and the investment outlays are discounted at the “required rate of return” to find the net present value (NPV). Financing costs are reflected in the required rate of return. <span>If we included financing costs in the cash flows and in the discount rate, we would be double-counting the financing costs. So even though a project may be financed with some combination of debt and equity, we ignore these costs, focusing on the operating cash flows and capturing the costs of debt (and other
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