NPV is sum of the cash flows with a discount rate. Is interest paid on a previous loan and taxes paid to the state included in the cash flows as negative values or do cash flows only include "real expenses"?
Real life projects include ALL the prospective cash inflows and outflows (these include taxes, interests paid, and everything you can possibly think of that will affect cash balance). However, the texbook examples normally exclude taxes and interests paid in order to simplify the problems and make them less confusing for the students. In such cases, these examples normally state something like "All cash flows are after-tax" at the end of the problem./
Are insterest and taxes included in calculation of Net Present Value?
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Real life projects include ALL the prospective cash inflows and outflows (these include taxes, interests paid, and everything you can possibly think of that will affect cash balance). However, the texbook examples normally exclude taxes and interests paid in order to simplify the problems and make them less confusing for the students. In such cases, these examples normally state something like "All cash flows are after-tax" at the end of the problem./
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