Which of the following should be treated as an incremental cash flow when computing the NPV of

Question:

Which of the following should be treated as an incremental cash flow when computing the NPV of an investment?

a. A reduction in the sales of a company’s other products caused by the investment.

b. An expenditure on plant and equipment that has not yet been made and will be made only if the project is accepted.

c. Costs of research and development undertaken in connection with the product during the past three years.

d. Annual depreciation expense from the investment.

e. Dividend payments by the firm.

f. The resale value of plant and equipment at the end of the project’s life.

g. Salary and medical costs for production personnel who will be employed only if the project is accepted.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...