Any cash flow that can be classified as incremental is relevant in a capital budgeting project analysis.

Question

Quizplus · Accepted Answer

Incremental cash flows are those that occur as a result of undertaking the project being analyzed. They are relevant because they represent the additional cash inflows or outflows that would occur if the project is undertaken, and therefore impact the overall profitability of the project. Non-incremental cash flows, such as sunk costs or overhead expenses that do not change as a result of the project, are not relevant in capital budgeting analysis.

Any Cash Flow That Can Be Classified as Incremental Is