Base Case

Incremental cash flows are the anticipated changes in cash flow from the base case. The firmís base-case projection must assess what the firmís market share and cash flows would be if no new projects were implemented; in other words, the after-tax cash flows without the project. The firmís planners must recognize that if nothing is done, customers may start buying competitorsí products in response to the marketing, new product development, and/or quality efforts of the competition. The base-case estimate should reflect these potential declines in cash flow.