Final answer:
The statement is True.
Step-by-step explanation:
Capital budgeting alternatives are indeed evaluated on the basis of incremental cash flows.
Incremental cash flows refer to the additional cash flows that are directly attributable to a particular capital budgeting project. These cash flows are considered in the evaluation process because they help determine the profitability and financial viability of the project.
In contrast, sunk costs and overhead costs are not included in the evaluation of capital budgeting alternatives as they are not directly related to the specific project.