The most important and also the most difficult part of an investment analysis is to calculate the cash flow associated with the project; the cost of funding the project; the cash inflow during the life of the project; and the terminal, or ending value of the project. Shareholders are interested in how many additional rupees they will receive in future for the rupees they lay out today. Hence, what matters is not the project’s total cash flow per period, but the incremental cash flow for a variety of reasons. They include;
- Cannibalization: When a new product is introduced it may take away the sales of existing products.