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

Quizplus · Accepted Answer

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