With regard to the most appropriatetreatment of cash flows in capital budgeting,which of the following is correct?
 
　　A. A project is evaluated using its incrementalcash flows on an after-tax basis.
 
　　B. Interest costs are included in theproject's cash flows to reflect financing costs.
 
　　C. Sunk costs and externalities should notbe included in the cash flow estimates.
 
　　Solution: A

 
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