Project Cash Outflows – Parent Perspective

The first step in NPV is identifying "How much money leaves our pocket?".

1. Components of Initial Outflow

1. Equity Investment: Cash sent from India to Vietnam to start the company.
2. Loan Guarantees: Sometimes Parent guarantees a loan, which reduces its own borrowing capacity.
3. Working Capital: Initial inventory and cash required to run operations.

2. What to Include vs Exclude?

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3. Exam Notes: Writing the Answer

Question: "Explain the components of Project Cash Outflows." (5 Marks)

Answering Strategy:

1. Definition: Initial Investment.
2. List: Equity, Debt, Working Capital.
3. Concept: Mention "Sunk Cost Fallacy" (Do not include past expenses).

Summary

• Accuracy: Under-estimating outflow is the #1 reason for project failure.
• Currency: Outflows happen in Home Currency (Equity) and Foreign Currency (Local borrowing).

Quiz Time! 🎯

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