The correct answer is: A. Sunk costs are ignored.
Sunk costs are costs that have already been incurred and cannot be recovered. They are not relevant to the decision of whether or not to invest in a new project, because they will not be affected by the decision.
Opportunity costs are the benefits that are forgone by choosing one alternative over another. They are relevant to the decision of whether or not to invest in a new project, because they represent the value of the best alternative that is being forgone.
Incremental cash flows are the cash flows that are directly attributable to a new project. They are the only cash flows that should be considered when making a capital budgeting decision.
Relevant cash flows are the cash flows that are affected by the decision of whether or not to invest in a new project. They include incremental cash flows, as well as opportunity costs.