Chapter Net Present Value and Capital Budgeting 7.2 Incremental cash flows 7.2.1 Sunk costs A cost that has already been incurred and and can not be removed and therefore should not be considered in an investment decision 7.2.2 Opportunity cost The most valuable alternative that is given up if a particular investment is undertaken. 7.2.3 Side effects Erosion is the cash flows of a new project that come at the expense of all firms existing projectsChapter 7 Net Present Value and Capital Budgeting 7.2 Incremental cash flows 7.2.1 Sunk costs A cost that has already been incurred and and can not be removed and therefore should not be considered in an investment decision. 7.2.2 Opportunity cost The most valuable alternative that is given up if a particular investment is undertaken. 7.2.3 Side effects • Erosion is the cash flows of a new project that come at the expense of all firm’s existing projects