Capitalized expenditures such as shipping costs are part of the cost of the fixed asset, and so they are a part of the Year 0 cash outflow. Any change in net working capital (usually an increase, but it could also be a decrease) is also a part of the Year 0 cash outflow. The impact of a spontaneous change in current liabilities is a part of the Year 0 cash flow because it is a part of the change in net working capital. An increase in accounts payable is a spontaneous change in current liabilities. It is called "spontaneous" because it just happens automatically. The company does not approach its vendors and ask them if it can carry a larger balance due to them. But when the company increases its purchases, that automatically creates increased accounts payable. An increase in accounts payable would function like a cash inflow. If accounts payable increase when inventory, a current asset, increases, that means that the full amount of the inventory increase has not been paid for yet. Thus the apparent cash outflow caused by the increase in inventory is reduced by the increase in accounts payable.
The cash outflow for the initial investment should include all of these things. Capitalized expenditures such as shipping costs are part of the cost of the fixed asset, and so they are a part of the Year 0 cash outflow. Any change in net working capital (usually an increase, but it could also be a decrease) is also a part of the Year 0 cash outflow. If an old asset is being replaced, then the net proceeds from the sale of the old asset are also a part of the Year 0 cash outflow. The impact of a spontaneous change in current liabilities is a part of the Year 0 cash flow because it is a part of the change in net working capital. An increase in accounts payable is a spontaneous change in current liabilities. It is called "spontaneous" because it just happens automatically. The company does not approach its vendors and ask them if it can carry a larger balance due to them. But when the company increases its purchases, that automatically creates increased accounts payable. An increase in accounts payable would function like a cash inflow. If accounts payable increase when inventory, a current asset, increases, that means that the full amount of the inventory increase has not been paid for yet. Thus the apparent cash outflow caused by the increase in inventory is reduced by the increase in accounts payable.
Capitalized expenditures such as shipping costs are part of the cost of the fixed asset, and so they are a part of the Year 0 cash outflow.
Any change in net working capital (usually an increase, but it could also be a decrease) is also a part of the Year 0 cash outflow. If an old asset is being replaced, then the net proceeds from the sale of the old asset are also a part of the Year 0 cash outflow. The impact of a spontaneous change in current liabilities is a part of the Year 0 cash flow because it is a part of the change in net working capital. An increase in accounts payable is a spontaneous change in current liabilities. It is called "spontaneous" because it just happens automatically. The company does not approach its vendors and ask them if it can carry a larger balance due to them. But when the company increases its purchases, that automatically creates increased accounts payable. An increase in accounts payable would function like a cash inflow. If accounts payable increase when inventory, a current asset, increases, that means that the full amount of the inventory increase has not been paid for yet. Thus the apparent cash outflow caused by the increase in inventory is reduced by the increase in accounts payable.
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