Capital Budgeting: Cash Flows and NPV

This lecture covers the importance of using incremental cash flows in capital budgeting decisions, focusing on the impact of project-related cash flows, incidental effects, sunk costs, and opportunity costs. Through examples involving a razor innovation project, a casino analogy, and a free-range chicken farm project, the instructor explains how to calculate the net present value (NPV) correctly. The lecture emphasizes the need to consider all relevant factors to make informed capital budgeting decisions.