G.2 INVESTMENT CASH FLOWS

The economic analysis of a project must consider all the cash flows associated with acquiring and later disposing of project assets. The flows are usually referred to as investment cash flows. For any project, there are a number of different types of investment cash flows to consider, including the cost of acquisition (e.g., cost of the asset, setup expenditures, including shipping and installation, and any tax credit¹).

At the end of the useful life of an asset, management may be able to sell the asset or may have to pay another party to haul it away or close it down. If management is making a decision that involves replacing an existing asset, the cash flow from disposing of the old asset must be considered because it is a cash flow relevant to the acquisition of the new asset.