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Hi,
To confirm:
Relevant costs are costs that affect cash flows
and
Irrelevant costs are costs that don’t affect cash flow.
??Would I need to memorise the cash flow statement for this?
Relevant costs are indeed costs that are directly relevant to a particular decision and are expected to differ between alternatives, affecting cash flows. On the other hand, irrelevant costs are those that do not impact cash flows, such as sunk costs.
It is not necessary to memorise cflow in detail, but understanding the components and how they relate to relevant and irrelevant costs is important for investment appraisal.
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