The difference between a firm's future cash flows if it accepts a project and the firm's future cash flows if it does not accept the project is referred to as the project's:
A)incremental cash flows.
B)internal cash flows.
C)external cash flows.
D)erosion effects.
E)financing cash flows.

Question

Quizplus · Accepted Answer

Incremental cash flows represent the difference in cash flows between two alternatives, in this case, accepting or not accepting the project. Internal and external cash flows refer to cash flows generated or received from within the firm or from outside parties, respectively. Erosion effects refer to the potential loss of sales revenue from existing products due to the introduction of a new product. Financing cash flows involve borrowing, lending, or raising capital to fund the project. Therefore, the best choice to describe the difference in cash flows between accepting and not accepting a project is incremental cash flows.

The Difference Between a Firm's Future Cash Flows If It