PRC-2 · Chapter 6 · Question 15 of 45
In standard discounted cash flow modeling, how is the initial capital investment required to start a project typically treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) As a cash outflow occurring in Year 0, which is not discounted.
Explanation
The initial capital outlay occurs immediately at the start of the project timeline (Year 0). Because no time has elapsed, its present value is equal to its face value, meaning it requires no discounting.
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