Our analysis will normally involve cash flows from a project in an existing company that has some on-going operation on other activities and projects.  As such, our focus will be in the incremental cash inflows and outflows due to the project that we are examining.  The cash inflows and outflows will have various components.  A brief description of these components is provided below.  Keep in mind that not all projects will involve all components described below.  Various projects will have different subsets of these components and some projects can have all components.

Initial Investment: All projects will require some initial capital outlay.  This initial investment will be a cash outflow.

Salvage Value:  At the end of the project some salvage value can be recovered.  The salvage value is a net amount, net of any removal or dismantling costs.  If the net salvage value is small, it can be excluded from the cash flow analysis.  Salvage value is usually positive, which means it is a cash inflow.  But there can be cases when the dismantling and removal costs outweigh the returns from the salvaged asset, thereby rendering the net salvage value negative.

Working Capital: Sometimes projects need investment in non-depreciable assets to support the operations required by the project.  Capital assets are depreciable and investment in capital assets is a major fraction of initial investment.  But money needed for working capital is also part of the initial investment and is a cash outflow.  During the course of the project when the working capital is returned or recovered, the money received by the company is classified as cash inflow.    If a project is successful and runs the full course of its life, the initial investment in working capital is recovered sometime during the life of the project. Hence working capital can either be cash outflow or inflow.

Revenues or Savings: The revenues obtained from the sale of a product is a cash inflow.  If no new revenue is generated by the project but costs of operation or maintenance is reduced, the reduction of cost will have the same effect on the profitability of the project as generation of an equivalent amount of revenue would have, and hence the reduction of costs is also treated as cash inflow.

Manufacturing Costs:  The cost of material to produce a product is an expenditure and is a cash outflow.  Manufacturing will also involve labor, periodic maintenance, and overhead costs as well.

Borrowed Funds: Occasionally companies borrow money for a project.  The borrowed amounts are receipts and hence constitute cash inflows.  The borrowed amounts will eventually need to be paid back.  The repayment of borrowed funds is cash outflow, and so are interest payments on the loan.

Income Taxes: Tax payments are expenditures, and they constitute a part of the cash outflow.  Their effect is accounted for in the computation of net income.  Net income is the taxable income less income taxes.  And net income is a part of the project cash flow.