Final answer:
Preferably, a financial analyst estimates cash flows for a project as cash flows after taxes, as this reflects the actual cash available after tax obligations and aligns with maximizing shareholder value.
Step-by-step explanation:
A financial analyst should estimate cash flows after taxes when evaluating a project. This approach reflects the actual cash that will be available to the company after fulfilling its tax obligations. Estimating post-tax cash flows is crucial because these flows determine the project's value to the investors or the firm. While accounting profit indicates the cash difference between revenue and explicit costs, it does not account for taxes that impact the final cash flow to stakeholders.
Economic profit dives deeper by including both explicit and implicit costs, which may not be captured in accounting profit. However, for the practical purpose of financial analysis and decision-making, the focus on post-tax cash flows ensures alignment with the underlying goal of maximizing shareholder value, as taxes have a tangible impact on the project's net cash receipts.