Incremental cash flow refers to cash flow that is acquired by a company when it takes on a new project. ... In the event that a reduction in the cash flow of another aspect or product is the result of taking on a new project, then it is called cannibalization.

What are examples of incremental cash flows?

Incremental cash flow is the net cash flow from all cash inflows and outflows over a specific time and between two or more business choices. For example, a business may project the net effects on the cash flow statement of investing in a new business line or expanding an existing business line.

Is cannibalization included in NPV?

In calculating capital budgeting measures such as the NPV and IRR, the gross cash flows of the new project being introduced must be reduced by the cannibalization rate.