Which of the following cash flows are relevant incremental cash flows for a project that you are currently considering investing in?
A) The tax savings brought about by the project's depreciation expense
B) The cost of a marketing survey you conducted to determine demand for the proposed project
C) Interest payments on debt used to finance the project
D) Research and development expenditures you have made

Question

Quizplus · Accepted Answer

Tax savings from depreciation are relevant incremental cash flows because they represent additional cash flows that will only occur if the project is undertaken. These savings reduce the project's tax liability, increasing its net cash flows.

Which of the Following Cash Flows Are Relevant Incremental Cash