Interest payments on debt are not included in a project's incremental cash flows,but are instead accounted for in the project's discount rate.

Question

Quizplus · Accepted Answer

Interest payments on debt are considered a financing expense and not an operating expense, therefore they are not included in a project's incremental cash flows. Instead, the cost of debt is accounted for in the project's discount rate, which includes both the cost of debt and the cost of equity.

Interest Payments on Debt Are Not Included in a Project's