Capital Budgeting - Accounting Income

CFA Level II
#1

Hi, I know capital budgeting decisions are based on Cash flows and not accounting income but how do you calculate accounting income for a projcet? Thanks

#2

The same way you calculate any accounting income. Revenue - COGS - SG&A - Interest - Tax = Net Income. You would include Interest in accounting income but not in assessing cash flows for the purposes of calculating NPV of a project.

#3

okay thanks, I thought so but the only issue is how do you calc the interest?

#4

They give you interest expense. I’ve never calculated it in my L2 studies.