The value of a proposed capital budgeting project depends on the:
A) total cash flows produced.
B) incremental cash flows produced.
C) accounting profits produced.
D) increase in total sales produced.

Question

Quizplus · Accepted Answer

The value of a proposed capital budgeting project depends on the incremental cash flows produced. Incremental cash flows refer to the difference between the cash flows that will result from undertaking the project and the cash flows that would have been generated if the project had not been undertaken. Accounting profits may not accurately represent the cash flows generated by a project, and the increase in total sales does not necessarily indicate the profitability of the project. Therefore, the total cash flows produced are not the best choice.

The Value of a Proposed Capital Budgeting Project Depends on The