Should financing costs be included as an incremental cash flow in capital budgeting analysis?? why or why not??
Homework Answers
No. Financing costs are not included as incremental cash flows in capital budgeting because they are embedded in the "required rate of return" (or "cost of capital"). Financing costs are direct consequences of how the project is financed, whether or not the project is economically viable. If we include them as incremental cash flow, there will be double-counting as they are already embedded as required rate of return.
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Should financing costs be included as an incremental cash flow in capital budgeting analysis?? why or why not??
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