When forecasting the cash flows from an investment, several factors should be considered. First, 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. Next, 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, which may vary depending on the risk involved in proposed investments.
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