Question

If a company would still have a cash flow item even if they rejected potential new Project A, should this particular cash flow item be included in Project A's cash flow analysis?

Answer 1

Answer: No

Step-by-step explanation:

When computing a project analysis for a project, only relevant cash flow should be included in the Project's cash flow analysis. Relevant cash-flow are those that will only occur if the project was embarked on.

If the cash flow in question is still going to occur even if the project wasn't initiated as is the case with Project A, it is not a relevant cash-flow and should not be included in the cash-flow analysis.