Which of the following rules is essential for successful cash flow estimates, and ultimately, to successful capital budgeting analysis?
A. The return on invested capital is the only relevant cash flow.
B. Only incremental cash flows are relevant to the accept/reject decision.
C. Total cash flows are relevant to capital budgeting analysis and the accept/reject decision.
D. Sunk cost is affected by accept/reject decisions and considered while estimating incremental cash flows.
E. Opportunity cost has no impact on the cash flows and is not included in cash flow estimation.
Answer: B
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