The cash ﬂows of a project should:

Question

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The most important principle in calculating cash flows for a project is to consider all incremental costs, including opportunity costs. Sunk costs should not be considered because they are not relevant to the decision-making process. Financing costs related to new debt are also not included in cash flows because they are considered separate from the project itself. The cash flows should also be computed on an after-tax basis, accounting for any tax implications of the project. GAAP recognition of expenses or income does not necessarily align with the cash flow timing, so it should not be the primary consideration in calculating cash flows.

The Cash ﬂOws of a Project Should