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1. 1. explain why sunk cost should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. explain.

2. why do we focus on cash flows as opposed to net income in capital budgeting?

3. "is the cost of investment for decision making purposes the same as the cost of fixed cost of fixed asset capitalized in financial accounting?"\

4. Financial accounting data are not entirely suitable for use in evaluating capital expenditures. Explain.

Sunk cost should not be included in a capital budgeting analysis because it won't affect the cash flows of future projects. On the other hand, the opportunity cost and externalities should be included because they would both affect the incremental cash flows of a project. Therefore, only sunk cost is not relevant in budgeting analysis....