Which of the following should be treated as incremental cash flows when deciding whether to go ahead with a new pharmaceutical drug?

Question

Quizplus · Accepted Answer

Incremental cash flows refer to the additional cash flows a company will receive from undertaking a new project. The decrease in taxes resulting from capital cost allowance on new asset purchases is considered an incremental cash flow because it directly affects the cash flows the company will receive by undertaking the project. Past research and development costs (sunk costs) and accounting depreciation charges do not represent cash flows affecting the decision.

Which of the Following Should Be Treated as Incremental Cash