ECONOMICS

Detailed explanation-1: -an opportunity cost. The initial outlay involves the immediate cash outflow necessary to purchase the asset and put it in operating order. Sales captured from the firm’s competitors can be relevant to the capital-budgeting decision.

Detailed explanation-2: -What is an Initial Outlay? An initial outlay refers to the initial investments needed in order to begin a given project. For instance, if opening a new factory, a company would need to purchase new land and machinery in order to get the project going.

Detailed explanation-3: -Initial cash flow represents the upfront costs or initial cash outlay involved in starting a new project or purchasing an asset. In some projects, salvage proceeds from discontinued ventures may be considered by deducting those gains from the initial cash flow total.

Detailed explanation-4: -The initial outlay is the initial cash flow which is required in the year 0 for a given project. Along with the initial project costs, this is usually the largest cash flow in a given project.

Detailed explanation-5: -Step 2: Initial Outlay The initial outlay usually has three parts: cost of the new machine, the proceeds from selling the old machine (if there is one) and any additional net-working-capital that must be raised for the project.