Incremental project ((See Chapter 17 of the Vernimmen))

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.