Which of the following situations would not be considered as an incremental cash flow for a proposed new machine?

Question

Quizplus · Accepted Answer

Prepaid rent expense is not considered an incremental cash flow for a proposed new machine because it is a sunk cost, meaning it has already been incurred regardless of whether or not the new machine is purchased. Incremental cash flows are the additional cash flows—either inflows or outflows—that a company will experience by undertaking a new project, such as purchasing a new machine. Tax changes, spare parts inventory, and opportunity costs directly relate to the decision at hand and can change based on whether the project proceeds, making them relevant for consideration.

Which of the Following Situations Would Not Be Considered as an Incremental