Only project cash flows that are incremental to the rest of the business are relevant for capital budgeting purposes.

Question

Quizplus · Accepted Answer

Only cash flows that are additional or incremental to the current operations of the business should be considered while evaluating the profitability of a new project. Cash flows that would have occurred anyway, regardless of the new project, are not relevant for capital budgeting.

Only Project Cash Flows That Are Incremental to the Rest