An incremental project is an imaginary project with cash flows equal to the difference between the cash flows generated by a large-scale project and by a small-scale project. The NPV and IRR of an incremental project are looked at when choosing between a large and small project. If NPV is positive and/or IRR is higher than the Required rate of return, then the large project should be chosen.

(See Chapter 17 The internal rate of return of the Vernimmen)

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