Which of the following is an incremental cash flow?
A) Market research costs
B) Change in working capital
C) Sunk costs
D) Opportunity costs
E) Externalities

Question

Quizplus · Accepted Answer

Incremental cash flows are the additional cash flows that a firm receives or pays as a result of a particular decision. Change in working capital is an incremental cash flow, as it represents the change in a firm's current assets and liabilities due to the decision being made. Market research costs, sunk costs, opportunity costs, and externalities are not incremental cash flows. Market research costs and sunk costs are considered irrelevant to decision making as they are already incurred and cannot be recovered. Opportunity costs represent the benefits forgone by choosing one alternative over another, and externalities are societal costs or benefits that are not captured by the firm.

Which of the Following Is an Incremental Cash Flow