In making a capital budgeting decision we only include the incremental cash flows resulting from the investment decision.

Question

Quizplus · Accepted Answer

In making a capital budgeting decision, only the incremental cash flows resulting from the investment decision are considered because these are the cash flows that are directly affected by the investment and represent the additional cash flows the company would receive or lose if they proceed with the project. Other cash flows, such as sunk costs and overhead expenses, are not included because they are not affected by the investment decision.

In Making a Capital Budgeting Decision We Only Include the Incremental