Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• A) An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted.
• B) Sunk costs must be considered if the IRR method is used but not if the firm relies on the NPV method.
• C) A good example of a sunk cost is a situation where a bank opens a new office,and that new office leads to a decline in deposits of the bank's other offices.
• D) A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office,then expensed that cost for tax purposes,and now is deciding whether to go forward with the project.
• E) If sunk costs are considered and reflected in a project's cash flows,then the project's calculated NPV will be higher than it otherwise would have been had the sunk costs been ignored.

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Definitions:

Unconditional

Without any limitations, conditions, or restrictions; absolute.

Valid Gift

A gift that meets all the legal requirements to be considered legally effective and transferred from one person to another.

Adult Donor

An individual of legal age who gives something voluntarily without receiving any compensation.

Delivery

The process of transporting goods from one place to another, or the act of transferring possession and control of an asset to another party.