CMA Exam Part 2, Section E - Incremental Cash Flows Example

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Helpful thank you

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[@abduljaleel8533]

What will happen when you make an additional investment in the project, whether the npv decrease or increase

[@brianhock720]

You would need to analyze what the additional revenues or cash inflows from that additional investment will be. Any additional investment will cause the NPV to go down as there is an additional cash outflow. But, if the NPV of the cash inflows that result from that additional investment is greater than the investment, then the projects NPV as a whole will increase. If the additional investment does not creat additional cash inflows, then the NPV of the project will go down.

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@@brianhock720 thank you for your response

[@brianhock720]

@@abduljaleel8533 My pleasure