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Any incremental cash flow is relevant in a capital budgeting project analysis including incremental cash flows...

Any incremental cash flow is relevant in a capital budgeting project analysis including incremental cash flows associated with existing projects.

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An incremental cash flow is relevant in capital budgeting analysis because it analysis the proceeding cash flows after undertaking a project. These incemental cash flows including terminal value are discounted back to present to calculate the net present value and IRR. This is important because the projects with positive NPV are selected over negetive NPV. This helps making analysis on the existing projects in the same way.

For example if a company is thinking of initiating two projects in which one has a NPV of 2 million dollars using incremental cash flows and the other has only 1 million. Then the first project will be selected in capital budgeting

I hope this makes sense and helps you

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