- Initial Cash Flow
- The amount of money paid out or received at the start of a project or investment. This is generally a negative amount because projects often require a large initial capital investment by a company that will generate positive cash flow over time.
During the capital budgeting process, the attractiveness of a project is evaluated based on the cash flows generated by the project over its life. Using discounted cash flow analysis, the project's future value of the cash flows over its life are brought back to the present value to determine whether it is worthwhile for the company to pursue the project. Because the initial outlay is made at the start of the project (time zero), it isn't discounted.
For example, an oil company evaluating the attractiveness of a new refinery may budget for an initial outlay of $100 million to get the project started. This is then evaluated along with the future cash flows the project will generate over its life.
Investment dictionary. Academic. 2012.
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