CEVAP:

Financing costs are irrelevant cash flows to capital investment project evaluation which should not be included in the analysis. Although interest and loan payments require cash outflow, one should exclude them while making estimations of cash flows. The reason is cost of financing or minimum rate of required return is included in the capital budgeting analysis in the discount rate. Financing costs are incorporated in the process with the discount rate. Therefore, it would be double-considering if we included financing costs as cash outflows.