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Subtracting an outlay from an already net NPV

A model can double-count an initial cost when a net value is mistaken for gross discounted benefits.

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Read the supplied amount’s definition

Suppose additional investment is 10 and a supplied gross present value of future receipts is 15. Net value is 15 − 10 = 5. If the supplied 15 is instead already labelled project NPV including that investment, subtracting 10 again changes the meaning.

Separate the two statements

Different input labels
Supplied amountRequired treatment
Gross PV of future receipts = 15Subtract the outlay 10 once
Project NPV including outlay = 15Do not subtract the included outlay again

Reconstruct the boundary rather than guessing

Ask which dates, taxes and outlays were included in the imported number. A word such as expected value can be ambiguous. Trace the underlying schedule before combining it with another amount.

Keep earlier sunk spending out of this label check

Historical spending may belong in another report. It does not resolve whether the current supplied figure is gross or net. These are separate questions: the forward baseline and the definition of the amount being used.

Further references