For the purpose of performing capital budgeting analysis, Cash ﬂows must be incremental.

Question

Quizplus · Accepted Answer

Cash flows must be incremental, meaning they must be the cash flows that result directly from the investment project being considered, and not include cash flows that would occur regardless of whether the project is undertaken or not. This ensures that the analysis only focuses on the relevant cash flows that are directly affected by the investment decision.

For the Purpose of Performing Capital Budgeting Analysis, Cash ﬂOws