For example, in the case of an electric car project, which of the following cash flows should be treated as incremental flows when deciding whether to go ahead with the project?
A) The cost of research and development undertaken for developing the electric car in the past three years
B) The annual depreciation charge
C) Tax savings resulting from the depreciation charges
D) Dividend payments

Question

Quizplus · Accepted Answer

Incremental cash flows are those that will occur if the project is accepted. Tax savings from depreciation are incremental because they are directly related to the project's acceptance.

For Example, in the Case of an Electric Car Project