What does it means when a manager says œOur firm uses the stand-alone

QUESTION

What does it means when a manager says œOur firm uses the stand-alone principle. Because we treat projects like mini firms in our evaluation process, we include financing costs because they are relevant at the firm level.Could you help me understand this statement?
To understand this statement first we have to know what stand alone principle is Stand-alone principle: Stand alone principle means comparing two equal projects and their risks, and then choosing the best project which is profitable for that company. ”””””””””””””””””””””””””””””””””””””””””“ Explanation:- Include financing costs are not relevant at the firm¦

. Because according standard alone principle financing costs not relevant in the analysis of a projects incremental cash flows. As one particular project could be financed entirely with equity, another project could be financed with debt, and then firms over all capital structure remains unchanged.

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