Which of the Following Would Not Constitute a Sunk Cost

question 31

Multiple Choice

Which of the following would not constitute a sunk cost?

• A)The purchase price of $250,000 for a new printing machine after a successful bid for additional advertising print work that will generate for the printing company an estimated $430,000 in net cash flows per year for the next 3 years.
• B)The clean- up costs of $450,000 on a block of industrial land contaminated by industrial waste ordered by the Environment Protection Agency (EPA).This land could then be used to build twelve luxury townhouses at a cost of $3.8 million which would then be sold one year later (after they are constructed)for $930,000 each.
• C)A fee of $50,000 paid to a marketing company for assessing the feasibility of a potential casino project that has an outlay of $250 million and is expected to produce net cash flows of $10.3 million per year for 20 years.
• D)The purchase price of $1.23 million for block of land five years ago that could be used for a new factory costing $2.35 million to construct and which is expected to produce net cash flows of $0.945 million per year for 5 years.