A capital budgeting project's incremental net income computation for purposes of determining incremental tax expense includes investments in working capital.

Question

Quizplus · Accepted Answer

Investments in working capital are not included in the computation of incremental net income for tax purposes because they are considered non-operating cash flows. Incremental net income calculations focus on revenues and expenses directly related to operations.

A Capital Budgeting Project's Incremental Net Income Computation for Purposes