The relevant cash flows for a proposed project are the incremental after-tax cash outflows and the resulting cash inflows.

Question

Quizplus · Accepted Answer

The analysis of a project is substantially simplified by considering only incremental cash flows. An analysis of the incremental cash flows replaces an analysis of two scenarios: 1) the value of the firm without the project; and 2) the value of the firm with the project. Incremental cash flows are those that change as a result of accepting a project.

The Relevant Cash Flows for a Proposed Project Are the Incremental