4. Relevant cash flows

Which of the following are cash flows that Davis Company forgoes as a result of accepting the project under consideration? (In general, these are the cash flows of the next-best alternative to the project.)

- Opportunity costs

- An externality

- Sunk costs

Which of the following factors should Davis Company include in its capital budgeting analysis? Check all that apply.

-Daviss forecasted cash flows are expressed on an after-tax, as opposed to pre-tax, basis.

-Davis buys most of its raw materials on credit, causing accounts payable to increase by $30,000.

-Daviss annual common stock dividends total $435,000.

-Daviss preferred stock pays $150,000 in dividends each year.