1. Why are incremental cash flows the relevant cash flows for capital budgeting analysis? Why not just analyze the levels of cash flow and be done with it? Fully explain.

1. Should cannibalization effects be considered sunk costs or opportunity costs in a capital budgeting context? Explain.

1. What problem would arise if in projecting cash flows for a capital budgeting decision on a project interest expense was not excluded?

4. Why do firms typically choose to use MACRS depreciation methods to compute depreciation expense for tax purposes yet sometimes report depreciation expense to stockholders using other methods