Capital Budgeting Decisions are based on ___________.

Incremental profit

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Incremental cash flows

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Incremental assets

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Incremental capital

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Solution

The correct option is B Incremental cash flows
An incremental cash flow is the additional operating cash flow that an organisation receives from taking a new project. A positive incremental cash flow means that the company's cash flow will increase with the acceptance of the project.

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''A capital budgeting decision is capable of changing the financial fortunes of a business''. Do you agree? Why or why not?

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