Question

The fact that a proposed project is analyzed based on the project's incremental cash flows is the assumption behind which one of the following principles?1. underlying value principle2. stand-alone principle3. equivalent cost principle4. salvage principle5. fundamental principle

Answer 1

Stand alone principle

Explanation:

The principle that an organization must determine whether to undertake a project on the basis of the results of similar projects with the same risk.

Take for example: independent profit, independent risk.

It is possible to measure the isolated income of every individual business unit or section, then combine them together, to calculate the total profit of the whole organization.

When measuring self-employment, values will only be included because they are generated directly from the business of the company segment.