Which one of the following is not a basic principle for estimating a project's net cash flows?
A)Sunk costs are relevant.
B)Cash flows should be estimated on an incremental basis.
C)Cash flows should be estimated on an after-tax basis.
D)Opportunity costs are relevant.

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. These costs are not relevant to estimating a project's net cash flows since they are not future cash flows and cannot be influenced by decisions about the project. The other three principles listed (estimating cash flows incrementally, estimating cash flows on an after-tax basis, and considering opportunity costs) are all basic principles for estimating a project's net cash flows.

Which One of the Following Is Not a Basic Principle