Which of the following cash flows should be treated as incremental flows when deciding whether to go ahead with a new pharmaceutical drug?

Question

Quizplus · Accepted Answer

Incremental cash flows are the cash flows that will result only if the project is undertaken. None of the options listed above represent the cash flows that would occur only if the new pharmaceutical drug is developed. Option A represents sunk costs, which are not considered incremental cash flows. Option B represents a non-cash expense and does not affect cash flows. Option C represents a tax charge resulting from option B and is not an incremental cash flow. Therefore, none of the options should be treated as incremental flows.

Which of the Following Cash Flows Should Be Treated as Incremental