Initial Cash Outlay
The amount of money paid out or received at the start of a project or investment. This is in general a negative amount because projects often require a large initial capital investment by a company that will generate positive cash flow over time.
Discounted Cash Flow methods typically presume that a project's initial cash outlay is known with certainty. In capital budgeting analysis, a project's initial cash outlay is in general treated a single, certain cash outflow. However, upon closer inspection, one or more of the following Sensitivity analysis is an effective way to address initial cash outlay risk.
The initial cash outlay may have several cash outflow components, for example, land, land improvements, buildings, machinery and equipment.
Some of the initial cash outlay components may be certain cash flows and some may be uncertain or risky cash flows.
Some initial cash outlay components may be capitalized, but not subject to tax depreciation for example, land. An outflow like this is already "after-tax" and renders no depreciation tax-shield
benefits that would affect future after-tax operating cash inflows.
Other initial cash outlay components may also be capitalized, but would be subject to tax depreciation
for example: land improvement, buildings, machinery and equipment. These outflows will have
spillover effects on future operating cash inflows since of their depreciation tax shield.
Some initial cash outlay constituent flows may occur after time period zero.
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