Question

When estimating the incremental after-tax free cash flows for a project, we include which one of the following costs?A. Investment costsB. Opportunity costsC. Sunk costsD. Costs that impact another product that the firm does not produce.

Answer 1

Answer: Opportunity cost

Explanation:

Opportunity cost is the cost of what one forgoes when one makes another decision or another choice. When estimating the incremental after-tax free cash flows for a project, the opportunity cost is included.

A sunk cost is a type of cost that an economic agent such as the individual, the firm or the government has already spent and therefore cannot be recovered again. This isn't included.