What is the incremental cash flow for a company that forgoes $7000 p.a.rental for factory space for manufacturing a product that will return net cash inflows of $20 000 p.a.?
A)$27 000
B)$20 000
C)$10 000
D)$13 000

Question

Quizplus · Accepted Answer

The incremental cash flow can be calculated by subtracting the cost of forgoing the rental income from the net cash inflows generated by manufacturing the product. 
Incremental cash flow = Net cash inflows - Cost 
= $20,000 - $7,000 
= $13,000 
Therefore, the best choice is option D, with an incremental cash flow of $13,000.

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