Importance of incremental cash flows in capital investment decisions
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It is important to identify and use only incremental cash flows in capital investment decisions:
a. Because ultimately it is the change in a firm's overall future cash flows that matter.
b. Because they are the simplest to calculate.
c. To accommodate unforeseen changes that might occur.
d. Only when the stand-alone principal fails to hold.
e. Whenever sunk costs are involved.
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The importance of incremental cash flows in capital investment decisions are given.
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