One purpose of identifying all the incremental cash flows related to a proposed project is to:
A)isolate the total sunk costs so they can be evaluated to determine if the project will add value to the firm.
B)eliminate any cost which has previously been incurred so that it can be omitted from the analysis of the project.
C)make each project appear as profitable as possible for the firm.
D)include both the proposed and the current operations of a firm in the analysis of the project.
E)identify any and all changes in the cash flows of the firm for the past year so they can be included in the analysis.

Question

Quizplus · Accepted Answer

The purpose of identifying all the incremental cash flows related to a proposed project is to eliminate any cost which has previously been incurred (sunk costs) so that it can be omitted from the analysis of the project. This ensures that the analysis focuses only on future cash flows that are directly attributable to the project, providing a clearer picture of its potential impact on the firm's finances.

One Purpose of Identifying All the Incremental Cash Flows Related