To estimate the costs of a new project or initiative, you need to determine the initial cash outlay which includes items such as equipment costs, shipping costs, installation costs, start-up costs, and training for the people involved. Everything that goes into getting the project up and running has to be part of your initial cash outlays. Then, forecast the cash flows from the investment by estimating the net cash the investment will bring, allowing for variables like increased working capital, changes in taxes and adjustments for non-cash expenses. Lastly, determine the minimum return often called a hurdle rate.
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