An investor is computing the NPV of a project to determine whether or not to build a building. The investor has building plans produced by an architect that they will use to complete the building. The cost of these plans was $50,000. Should the $50,000 be included in the NPV calculation? a) Yes, because the cost is related to the building. b) Yes, because it is an opportunity cost. c) Yes, because it is a fixed cost. d) No, because it is a sunk cost.
An investor is computing the NPV of a project to determine whether or not to build a building. The investor has building plans produced by an architect that they will use to complete the building. The cost of these plans was $50,000. Should the $50,000 be included in the NPV calculation? a) Yes, because the cost is related to the building. b) Yes, because it is an opportunity cost. c) Yes, because it is a fixed cost. d) No, because it is a sunk cost.
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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An investor is computing the NPV of a project to determine whether or not to build a building. The investor has building plans produced by an architect that they will use to complete the building. The cost of these plans was $50,000. Should the $50,000 be included in the NPV calculation?
a) Yes, because the cost is related to the building.
b) Yes, because it is an opportunity cost .
c) Yes, because it is a fixed cost.
d) No, because it is a sunk cost.
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