7. Which of the following statements is CORRECT? a. A sunk cost is any cost that must be expended in order to complete a project and bring it into operation. b A sunk cost is any cost that was expended in the past but can be recovered if the firm · decides not to go forward with the project. C. A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project. d Sunk costs were formerly hard to deal with, but once the NPV method came into wide · use, it became possible to simply include sunk costs in the cash flows and then calculate the project's NPV. e. A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.
7. Which of the following statements is CORRECT? a. A sunk cost is any cost that must be expended in order to complete a project and bring it into operation. b A sunk cost is any cost that was expended in the past but can be recovered if the firm · decides not to go forward with the project. C. A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project. d Sunk costs were formerly hard to deal with, but once the NPV method came into wide · use, it became possible to simply include sunk costs in the cash flows and then calculate the project's NPV. e. A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:7. Which of the following statements is CORRECT?
a. A sunk cost is any cost that must be expended in order to complete a project and bring it
into operation.
b A sunk cost is any cost that was expended in the past but can be recovered if the firm
· decides not to go forward with the project.
c. A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered
if the firm decides not to go forward with the project.
d Sunk costs were formerly hard to deal with, but once the NPV method came into wide
· use, it became possible to simply include sunk costs in the cash flows and then calculate
the project's NPV.
e. A good example of a sunk cost is a situation where Home Depot opens a new store, and
that leads to a decline in sales of one of the firm's existing stores.
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