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Project Cash Flows: 1. Initial Investment Outlay
Project Cash Flows: 1. Initial Investment Outlay
2.
Prepare a cost budget. A cost budget is a projection of all expenses the business will
incur during the forthcoming period. Generally a cost budget is split into two sections: the
cost of producing revenue and fixed costs. For manufacturing companies, the cost of
producing revenues is the cost of goods sold. For service companies, the cost of producing
revenues is the cost of sales.
3.
Prepare the operating budget. Start with the projected revenue from the sales budget.
Subtract the cost of producing revenue from the cost budget. This sum equals the gross
profit. Next, subtract fixed costs. Then, subtract financial costs such as interest and
depreciation. The final sum is projected income.