is interest included in cash flow for Corp Finance?

CFA Level II
#1

quick question. In corporation finance project when we calculate annual cash flow, when we use debt to finance, do we need to include the interest as annual expense? Thanks! I think we may need exclude it since we use NPV which already counts the interest value. but not sure…

#2

Are you talking about replacement/expansion project. If that’s the case then no.

#3

In this kind of project, you always use the WACC to discount the cash flows (of the project). The WACC already includes ALL costs of funding (debt, equity and, possibly, preferred), so you do not have to include interests as cash outflows… Please, correct me if I’m wrong…

#4

^^you are correct.