Which one of the following is an example of an incremental cash flow?

Question

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DEIncremental cash flows are the additional cash flows a company expects to generate from a new project or investment. Choice C (rent on new machinery for an upcoming project) is an incremental cash flow because it represents an additional cost directly associated with the new project. Choice D (property taxes on a currently owned warehouse that will be utilized for a new project) is also an incremental cash flow because the utilization of the warehouse for a new project represents an additional use of an asset that incurs property taxes as a result of the project. Choice E (insurance on a company-owned building for a new project) is an incremental cash flow because the insurance cost associated with using the building for a new project is an additional expense directly related to the project. Choices A and B are not incremental cash flows because they represent ongoing expenses that are not directly affected by the decision to undertake a new project.

Which One of the Following Is an Example of an Incremental