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Answer the following questions regarding the (incremental) free cash flows of a project a. What is the after-tax income generated by the project for its

Answer the following questions regarding the (incremental) free cash flows of a project

a. What is the after-tax income generated by the project for its investors each year?

b. Are the free cash flows generated by the project for its investors = income generated by the project? Why or why not (if not, explicitly state the accounting principles that lead to this disconnect)? If not, what are the key adjustments you need to make to convert income into cash flows?

c.Do the free cash flows depend on how the project is financed? Explain.

d.Explain why sunk costs are not included in a capital budgeting analysis but opportunity costs and externalities.

externalities are.

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