Including financing costs in the cash flow estimates would have the effect of counting them twice, once as a cash flow component, and once in the estimated discount rate.

Question

Lesley Serrano · Accepted Answer

Final Answer : True, Explanation :  Financing costs, such as interest payments, are already accounted for in the estimated discount rate. Including them as a separate cash flow component would result in counting them twice, overestimating their impact on the overall cash flow.

Including financing costs in the cash flow estimates would have the effect of counting them twice, once as a cash flow component, and once in the estimated discount rate.

Definitions

Learning Objectives

Learning Objectives

Related questions