Only incremental, after-tax cash flows are relevant to the evaluation of a capital budgeting project.

Question

Quizplus · Accepted Answer

Only the incremental after-tax cash flows that will result if the project is implemented should be considered when evaluating a capital budgeting project. Non-incremental cash flows or sunk costs should not be included in the analysis. Additionally, any financing costs or tax effects should be taken into account to accurately measure the project's profitability.

Only Incremental, After-Tax Cash Flows Are Relevant to the Evaluation