Question

What is the feasibility expenditure treatment in cash flow statement? (Expense that used to conduct study before the product being produce) / is the feasibility expenditure will be classified as sunk cost and will not be record in the cash flow statement? If yes, then will it be use in the NPV calculation as in initial cost?

Answer 1

Feasibility expenditure (expense) is a sunk cost. It's already incurred, can't be recovered, and is no longer dependent upon the decision of go or no go. Hence, it's treated as a sunk cost and irrelevant cost.

Since it's a sunk cost and irrelevant cash flow, the same wil not be used in the NPV calculation as initial cost.