In general,a project's free cash flows will fall into one of three categories: (1)incremental costs,(2)sunk costs,and (3)opportunity costs.

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Incremental cash flows are relevant for project evaluation, but sunk costs and opportunity costs are different concepts. Sunk costs are past costs that cannot be recovered and should not be considered in project evaluation. Opportunity costs represent the benefits foregone by choosing one alternative over another, but they are not a category of free cash flows. Free cash flows typically refer to the cash that a project is expected to generate after accounting for all expenses, including opportunity costs, but excluding sunk costs.

In General,a Project's Free Cash Flows Will Fall into One