logo
Ask Question

Asked by Bahaa Zkout on Jun 08, 2024

verifed

Verified

The incremental cash flows of a replacement project can be estimated as the difference between operating with the new and the old equipment.

Incremental Cash Flows

The additional cash flow a project generates over the basic operation cash flows, used to analyze the profitability of a potential investment.

Replacement Project

A replacement project involves investing in new assets to replace old, inefficient, or obsolete ones to maintain or improve operational efficiency.

Operating

Pertaining to the day-to-day operations of a company or organization, involving processes that contribute to the production of goods or services.

  • Understand the concept of incremental cash flow for project evaluations, highlighting its attention to both beneficial and detrimental effects.
verifed

Verified Answer

JG
Justin GraysonJun 12, 2024
Final Answer :
True
Explanation :
This is a correct statement. Incremental cash flows for a replacement project can be calculated as the difference between the expected cash flows with the new equipment and the expected cash flows with the old equipment. This allows for a comparison of the potential profitability of the new investment.

Related questions

A Firm Should Evaluate a Project According to the Incremental ...

The Incremental Cash Flows of a New Venture Tend to ...

The Evaluation of a Project Based Solely on Its Incremental ...

Which of the Following Is True Regarding Project Evaluation ...

According to the Incremental Cash Flow Principle, a Firm Should ...