Which of the following is not relevant in a capital budgeting analysis because it is not an incremental cash flow?
A)Changes in the firm's net working capital
B)Externalities
C)Shipping and installation costs associated with the purchase of a capital budgeting project
D)Purchase price of a capital budgeting project
E)Salvage value of a capital budgeting project

Question

Quizplus · Accepted Answer

Externalities are costs or benefits that affect a party who did not choose to incur that cost or benefit. While they can impact the overall economy or society, they are not considered incremental cash flows directly associated with a capital budgeting project's cash flow analysis. Incremental cash flows are the additional cash flows—outflows or inflows—expected to result from a capital budgeting decision, directly affecting the project's profitability.

Which of the Following Is Not Relevant in a Capital