When performing discounted cash flow analysis, what costs are disregarded? Why? What error(s) occur if these costs are included in the analysis?
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In capital budgeting analysis, one of the tools used is discounted cash flow analysis. In this analysis five elements are taken into account and these are required rate of return, economic life of the project, amount of cash inflow in each year, amount of investment, and terminal value (Anthony, Hawkins & Merchant, 2003, p. 909).
The amount of cash flow element disregards some costs based on the differential ...
The solution performs discounted cash flow analysis. What errors occur if these costs are included in the analysis are provided.