5 Ignore financing costs in any cash flows as these are already incorporated within the project’s discount rate. For our purposes here (although it is not always the case)

the investment decision is considered separately from the financing decision. At this stage we are primarily concerned with evaluating the economic worth or value of an investment project, not assessing its means of financing.

If, for example, an investment project were to be financed with a long-term loan, to include the interest charges as an after-tax project cash flow would be to doublecount them and thus understate the NPV. The interest charges are already subsumed within the project’s discount rate, which in turn already reflects the company’s overall cost of capital from all sources, debt and equity.