Question

Which of the following costs is relevant for cashflow calculation for a project Group of answer choices

Interest expense of $500 per month for financing capital for the project

Incurred cost $5000 for pre-assessment of market demand for project output

Project proposal preparation cost of $8,000

Cleaning cost of $200 per month will discontinue once the project is started

Answer 1

A cost is considered to be relevant for cash flow calculation if you will not incurr that cost in case the project is not undertaken.

From the given options,

• Incurred cost of $5,000 for pre-assesment of market demand for project output
• Project proposal preparation cost fo $8,000
• Cleaning cost of $200 per month that will discontinue once the project is started

These will be incurred even if the project is not taken forward.

Hence, costs relevant for cashflow calculation for a project are

• Interest expense of $500 per month for financing capital for the project output

Let me know in the comment section in case of any doubt.