In the process of appraising a project, financial considerations [interest expenditure] are not taken into account. The financial charges incurred by the firm are the costs of borrowing or the loan taken out by the company. These expenses are taken into consideration by the firm when making financing choices.
The financial expenses are included in the calculation of the cost of capital. Taking them into account, that is, deducting them from cash flows, it would be equivalent to calculating the capital cost two times.
Another reason is that, while reviewing a project, the cash flows created by the assets project serve as the foundation for assessment. There are no cash flows from the asset or project because of the interest expenditure that is paid to creditors.
As a result, the interest expense is not important for the project’s assessment. It is a factor that is taken into consideration while making financial choices for the company.
Please show me detailed calculations, not by excel or other software
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