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Excel Finance Class 82: Relevant Costs For Discounted Cash Flow Analysis = Incremental Cash Flows

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1. Incremental Cash Flows = difference between future cash flows with a project & without the project.
2. Any cash flow that exists regardless of whether or not a project is undertaken in not relevant.
3. Incremental Cash Flows = Aftertax Incremental Cash Flows
4. Sunk Costs not relevant
5. Opportunity Costs are relevant
6. Side Effects/Erosion are relevant
7. Change in Net Working Capital is relevant
8. Financing Costs are dealt with as a managerial variable and are not considered with the projects cash flows (Cash Flow To/From Creditors or Stockholders).

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