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When estimating the incremental cash flow at T=0, we have to include: The cost of the investment. The cost of any modifications. The cost of

When estimating the incremental cash flow at T=0, we have to include:

  • Thecostof the investment.
  • Thecostof any modifications.
  • Thecostof delivery and set up.
  • Anynet investmentin working capital that results (plus or minus).

All of theseexcept the last oneis included in the originalcapitalizedvalue anddepreciatedover the economic life of the project, but the last one (even though it is still an investment at T=0) isnot depreciated.

Why the difference?

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