ABC Engineering just bought a new machine. All of the following are examples of incremental cash flows EXCEPT

Question

Quizplus · Accepted Answer

Interest expense on the loan used to purchase the machine is not considered an incremental cash flow for project evaluation purposes because it is a financing cost, not a direct cash flow from the project's operations. Incremental cash flows should reflect changes in the firm's cash flows that are directly attributable to the project itself, such as installation costs, increased operational costs, and cash flows resulting from depreciation tax shields, but not the costs associated with how the project is financed.

ABC Engineering Just Bought a New Machine