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when calculate npv, i know allocate overhead charge is not relate to project , because whether the project is launch or not, the overhead charge is have to paid by the company too. but there have few question come in my mind, how about in order to launch the project, additional overhead cost is required. so these overhead can i include in npv ?
back to the question (proteus co) , my another question is, let say, management buyout are not take place, the cash flow to equity must minus allocated overhead right ?
another question also make me headache, since the management buyout is done, proteus co and tyche co is separated. how about tyche co’s daily overhead expense if not deducted (allocated overhead charge payable to proteus co) ?, since pre buyout got overhead expense, but after buyout, no expense at all.or maybe management service costing replace overhead ?
All additional costs (including any extra overheads) appear in the cash flows for the NPV.
If the management buyout did not take place then Tyche would continue to pay the overhead charge to Proteus (although there would then be no point in calculating the debt-equity ratios because nobody would be lending money).
Because it is taking place, Tyche will no long be paying an allocated overhead charge (it will be a separate company and Proteus can’t allocate overheads to a separate company). Instead, Proteus will invoice Tyche for management services.
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