It Is Important to Identify and Use Only Incremental Cash

question 232

Multiple Choice

It is important to identify and use only incremental cash flows in capital investment decisions:

• A) Because they are the simplest to identify.
• B) Only when the stand-alone principle fails to hold.
• C) Because ultimately it is the change in a firm's overall future cash flows that matter.
• D) To accommodate unforeseen changes that might occur.
• E) Whenever sunk costs are involved.