What cost should not be included when estimating the net present value of a capital investment’s incremental cash flows?

When estimating the net present value (NPV) of a capital investment's incremental cash flows, it's important to consider only relevant costs that will directly impact the future cash flows of the project. The costs of a marketing study completed a year ago are considered sunk costs, meaning they have already been incurred and cannot be recovered. Because these costs do not influence future cash flows or decisions about the investment going forward, they should not be included in the NPV calculation.

In contrast, future operational costs, costs for acquiring new assets, and employee training costs directly relate to the execution and profitability of the investment. These expenses will affect future cash flows and, therefore, must be factored into the NPV analysis to assess the potential profitability of a project properly.