Capital Eudgeting: Estimating Cashy Incremental Project Cash Flows Given a projectr expected cash flows, it is easy to calculate its NPV, IRR, MIRR, payback, and discounted payback. Cash flows are estimated based on informiation from various sources. There is uncertainty in a project's forecasted cash flows, and some projects are more uncertain and thus riskier than others. The most critical step in capital budgeting analysis is estimation. The key is to focus on only Factors that complicate the analysls are sunk costs, opportunity costs, externalities, changes in net operating working capital, and salvage values. Adfustments to the analysis must be made for concentrate on expansion project analyses here but there are similarities when analyzing replacement projects. Give the correct response to each of the following questions. Which of the following items should be included in the capital budgeting analysis? An outiay thot was incurred in the past and cannot be recovered in the future regardless of whether the project under considerabion is accepted is known as Which of the following is an example of an opportunity cost? a. A publesher introduces a new textbook which reduces sales of one of their exluting textbooks. b. A firm has land that can be used in building a new store. If the new store is not built, the firm could sell the land for $2 million (net of taxes). c. Apple's investment in the ifunes music store boosted sales of its IPod. d. The cost of a report done 2 years ago to investigate the potential of a new plant and the permits fecuired to build it: e. Statements on and d ore both examples of epporturity costs. The correct response is Which of the foliowing is an example of cannibalization? a. A publisher introduces a new textbook which reduces sales of one of their exinting textbooks. b. A firm nas tand that can be uted in bullding o new store. If the new stare is not built, the firm could sell the land for $2 million (net of tanes). C. Apple's investment in the irunes music store boosted sales of its ipod. d. The cost of a report done 2 years ago to investigate the petential of o new plant and the permits required to bulid it: e. Statements c and d are both examples of cannibalication. The correct response is