In estimating "after-tax incremental operating cash flows" for a project, you should include all of the following EXCEPT:Select one:a. changes in working capital resulting from the project, net of spontaneous changes in current liabilities.b. sunk costs.c. effects of inflationd. opportunity costs.

All of the following are anticipated effects of a proposed project. Which of these should be considered when calculating the cash flow for the final year of a project?Group of answer choicesnet working capital recovery and operating cash flowsalvage values and net working capital recoveryoperating cash flow, net working capital recovery, salvage valuesoperating cash flow onlyoperating cash flow and salvage values

Which of the following is not a good assumption to identify relevant cash flows?A new long-term investment project should “stand on its own feet” and be viewed as a “mini firm”Sunk costs and financial costs should not be includedOpportunity costs that can be attributed to the project should be includedOverhead costs that remain fixed should be allocatedChanges in working capital should be included

Answer each part separately. a) To finance a certain project, a company must borrow funds at 10 percent interest. How should it treat interest payments when it analyzes the project’s cash flows? Explain. b) What are the tax consequences of selling an investment asset for more than its book value? Does this have an effect on project cash flows? What is the effect if the asset is sold for less than its book value? Explain. c) Why must incremental after-tax cash flows rather than total cash flows be evaluated in project analysis? Explain. d) Differentiate between sunk costs and opportunity costs. Which of these costs should be included in incremental cash flows, and which should be excluded? Explain. e) Why is it important to consider cannibalization in situations where a company is considering adding substitute products to its main product line? Explain.

Use the template to calculate the net cash flows, NPV and IRR of the projects.Net Cash FlowProject/Year 0 1 2 3Project A Net Cash FlowProject B Net Cash FlowNPV of A = IRR (A) =NPV of B = IRR (B) =Working TableDiscount rate = 10.0%Item/Year 0 1 2 3Capital Costs - A -100Capital Costs - B -100Operating Costs - A-20 -25 -30Operating Costs - B-15 -20 -25Gross Revenues - A 70 65 60Gross Revenues - B 45 65 75Net Revenues - ANet Revenues - B

Which of the following may not generally result in underestimation of project cash flows?(1 Point)Under estimation of project cost of capitalUnder estimation of salvage valuesIgnoring intangible benefitsOverlooking the value of future options