Incremental Cash Flow

Incremental cash flows are those that are generated specifically because a company agrees to take on a given project. Project start-up costs (such as purchase of production infrastructure such as machinery) and running costs are incremental cash outflows. Revenues from the sale of products created by the machinery are incremental cash inflows, as is any residual value at the end of the asset’s life. Allocated costs to the new project by management are excluded as they are not incremental.