The changes in a firm's future cash flows that are a direct consequence of accepting a project are called ________ cash flows.
A)incremental
B)stand-alone
C)opportunity
D)net present value
E)erosion

Question

Quizplus · Accepted Answer

Incremental cash flows are the changes in cash flows that occur as a result of accepting a project. They represent the difference between the cash flows a firm would have if it accepts the project and the cash flows it would have if it does not accept the project. Stand-alone cash flows (B) refer to the cash flows of a project without considering its effect on the entire firm. Opportunity cash flows (C) are the potential cash flows that a firm could earn by investing in a different project. Net present value (D) is a method for evaluating investments by comparing the present value of cash inflows to the present value of cash outflows. Erosion (E) refers to the reduction in sales of an existing product or service due to the introduction of a new product or service by the same company.

The Changes in a Firm's Future Cash Flows That Are