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3. Identify the three categories to which incremental cash flows can be classified?

3. Identify the three categories to which incremental cash flows can be classified?

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Answer #1

Three categories of incremental cash flow
1. Investment : This includes initial investment in plant and machinery, setting up the plant and installation, It also includes opportunity cost.It might include investment in net working capital
2. Incremental operating cash flows:It includes incremental savings from operation, depreciation ,and their operating expenses.
3. Cash Flow at end of project:It includes after tax salvage value of project and recovery of the net working capital at the end.

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