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

question 356

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:

Self-Control

Self-Control is the ability to regulate one's emotions, thoughts, and behaviors in the face of temptations and impulses.

Big Five

A model of personality that outlines five broad dimensions of human personality: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Kindness

The quality of being friendly, generous, and considerate.

Agreeableness

A personality trait that reflects a person's tendency to be compassionate, cooperative, and friendly.