General Motors is considering a proposed new plant that would increase productive capacity. Which of the following statements is CORRECT?

Group of answer choices

The WACC used to discount cash flows in a capital budgeting analysis should be calculated on a before-tax basis. To do otherwise would bias the NPV upward.

Capital budgeting decisions should be based on before-tax cash flows because WACC is calculated on a before-tax basis.

When estimating the projects operating cash flows, it is important to include both opportunity costs and sunk costs, but the firm should ignore the cash flow effects of externalities since they are accounted for in the discounting process.

In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the WACC.