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Hi,
Although I’ve done some questions still couldn’t grab the concept behind Fixed costs inclusion or exclusion from NPV calculation. When to include? Although it is said only relevant costs should be included, still i find it quite difficult to sort it out. Kindly, need your support and comments to get the concept. Thanks!For all the cash flows you are looking at the extra cash flows to the company as a whole.
If total fixed costs for the whole company increase because of doing the project, then the increase is relevant.
If total fixed costs for the whole company do not change, then nothing is relevant (they can charge fixed costs however they want for profit purposes, but we are looking only at any extra cash that has to be paid)
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