If the adoption of a new product will reduce the sales of an existing product,then the project cash flows should:
A) reflect only the sales of the new product.
B) include only the reduction amount.
C) be reduced by the cash that would have been generated by those sales.
D) be adjusted upward by the reduction amount.

Question

Quizplus · Accepted Answer

The project cash flows should be reduced by the cash that would have been generated by the sales of the existing product that is expected to be cannibalized by the new product. This is because the new product's sales would come at the expense of the existing product's sales, resulting in a net loss for the company. Therefore, the cash flows should reflect the true impact on the company's overall revenue.

If the Adoption of a New Product Will Reduce the Sales