Asked by Tyler Knight on May 17, 2024
Verified
A firm should evaluate a project according to the incremental cash flow principle and should incorporate only negative effects on other existing projects.
Incremental Cash Flow Principle
The concept that financial decisions should be made based on the changes in cash flows that the decisions will cause, ignoring cash flows that will not be affected.
Negative Effects
Adverse outcomes or impacts that result from an action, event, or policy.
- Comprehend the principle of incremental cash flow in evaluating projects and its focus on both positive and negative impacts.
Verified Answer
LM
Lesley MartinezMay 21, 2024
Final Answer :
False
Explanation :
A firm should evaluate a project according to the incremental cash flow principle, incorporating both positive and negative effects on other existing projects. This means considering any additional revenues or cost savings as well as any potential losses or costs the new project may cause to existing operations.
Learning Objectives
- Comprehend the principle of incremental cash flow in evaluating projects and its focus on both positive and negative impacts.
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