The following excerpt is from a letter sent to a financial advice columnist: "My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I'm not eager to do that because we refinanced only nine months ago, paying $3,000 in fees and costs." Source: Liz Pulliam, Los Angeles Times advice column, March 24, 2004. How should the $3,000 in fees and costs be considered? OA. It is a sunk cost and should be taken into account when deciding to pay off the mortgage. OB. It should be taken into consideration in the decision as to whether or not to pay off the mortgage. OC. It is an explicit cost of paying off the mortgage. OD. It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.

The following excerpt is from a letter sent to a financial advice columnist: "My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I'm not eager to do that because we refinanced only nine months ago, paying $3,000 in fees and costs." Source: Liz Pulliam, Los Angeles Times advice column, March 24, 2004. How should the $3,000 in fees and costs be considered? OA. It is a sunk cost and should be taken into account when deciding to pay off the mortgage. OB. It should be taken into consideration in the decision as to whether or not to pay off the mortgage. OC. It is an explicit cost of paying off the mortgage. OD. It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following excerpt is from a letter sent to a financial advice columnist:
"My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I'm not eager to do that because we refinanced only nine
months ago, paying $3,000 in fees and costs."
Source: Liz Pulliam, Los Angeles Times advice column, March 24, 2004.
How should the $3,000 in fees and costs be considered?
OA. It is a sunk cost and should be taken into account when deciding to pay off the mortgage.
OB. It should be taken into consideration in the decision as to whether or not to pay off the mortgage.
C. It is an explicit cost of paying off the mortgage.
OD. It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.

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