Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project?
What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings?
What is the project's initial outlay?
Sketch out a cash flow diagram for this project.
What is the project's net present value?
What is its internal rate of return?
Should the project be taken on? (Explain your answer)