There can be biases in calculating project cash flow estimates.

List 2 -3 of these biases and elaborate as to why you think they are considered biases. Explain what can be done to help a firm guard against these biases.
If you make unbiased estimates of future cash flows, then these unbiased estimates should, on average, be equal to actual future cash flows (assuming you have enough observations across many projects and many years). However, there can be bias in calculating project cash flow estimate. This includes but not limited to the following:
1. A bias towards overestimating expected cash flows (or underestimating the discount rate) will make a good project look great. (Project is still accepted.) A bias towards underestimating expected cash flows (or overestimating the discount rate) will make a bad project look horrible. (Project is still rejected.)

2.

Problems occur in the following two circumstances: a) A bias towards overestimating expected cash flows (or underestimating the discount rate) can make a bad project look good. (Negative NPV project accepted.)

This problem is compounded if a manager has an incentive to overestimate cash flows (or underestimate the discount rate).

b) A bias towards underestimating expected cash flows (or overestimating the discount rate) can make a good project look bad. (Positive NPV project rejected.)
This problem is compounded if a manager has an incentive to underestimate cash flows (or overestimate the discount rate).