Cash inflows that would have occurred if not for an investment decision being made are called ____

Finance Dec 03, 2020

Cash inflows that would have occurred if not for an investment decision being made are called ____.

Group of answer choices

Opportunity costs

Incremental costs

Irrelevant costs

Sunk costs

Expert Solution

Option a is correct option. Opportunity cost is the cash flow not obtained if investment is done in other projects. These cash flows are foregone and not achieved after choosing other project.

Incremental cash is not correct option. It is actually the increase in cash received in investing in a new project.

Irrelevant cost is not correct option. This cash outflow can be avoided.

Option d is incorrect option Sunk cost is cost invested in building or plant which cannot be recovered and is not used in capital budgeting decisions

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