Question

When evaluating an investment, the MNC should consider the ____________ cash flows generated by the project.

a. total
b. variable
c. incremental
d. fixed

Answer 1

Answer: c. Incremental

Step-by-step explanation:

Simply put incremental cashflow is the additional cashflow that accrues to a company when it takes on a new project. The Multinational company should therefore consider this when they are accepting a project.

If the new project has a positive incremental cashflow, it will add to the cashflows of the company and so should be initiated as opposed to those with negative incremental cashflows.