You Discover the Engine-Oil Additive Your Scientists Developed Three Years

question 168

Multiple Choice

You discover the engine-oil additive your scientists developed three years ago makes a great men's after-shave once diluted properly using certain chemicals. How should you treat the original $125,000 of R&D expenditures that went into developing the engine-oil additive for your present decision regarding whether or not to begin production of the after-shave?

• A) Treat it as a cash outflow three years ago for the current project; that is, find the future value today of the $125,000 spent three years ago.
• B) The full $125,000 should be treated as an initial investment today.
• C) As a cash inflow since the formula has obviously increased in value over the years.
• D) As an opportunity cost if the formula cannot presently be sold to another manufacturer.
• E) As a sunk cost since the R&D expenditure has no bearing on today's decision.

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Definitions:

Hostile Competition

A form of rivalry where participants engage in aggressive behaviors and tactics to win or outperform each other.

Rationalization

the process of justifying behaviors or attitudes with logical, plausible reasons, even if these are not the true underlying motivations.

Political Goals

Objectives set by individuals or groups related to governing, influencing policy, or achieving power within a political framework.

Realistic Conflict Theory

A theory suggesting that intergroup conflict and prejudice arise from competition between groups for resources or status.