C09E Principles of Finance – Assignment 08
Part A
1. a. Describe an incremental cash flow for a project. Is the increase in cash that a new
project generates above the current cash flow with the addition of that specific new
project. Example: Coca-Cola decides to add a new flavor combination to its product line.
Coca-Cola would evaluate the possible issues with the new product line sunk costs,
opportunity cots, erosion costs, synergy gains, working capital, capital expenditures and
depreciation and cost recovery of the divested assets. Through this evaluation Coca-Cola
would have to factor all costs and gains associate with the new line of product. Costs
already incurred, evaluate the NPV to determine if the product or project is worth the
investment, determine increase sales and how this affects the current product line, detect
