If a Project Is Being Evaluated Three Years After It

question 191

Multiple Choice

If a project is being evaluated three years after it had started, how should the costs of the project from the three previous years be considered in deciding whether to continue the project?

• A)The costs should be incorporated as cash flows in evaluating whether the project should continue.
• B)These costs should not be included in the review of the project because the costs are sunk costs.
• C)These costs should be considered to demonstrate how much money the firm has already lost regardless of revenue.
• D)The previous costs and revenues should be incorporated into the cash flow stream in evaluating the future of the project.

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Definitions:

Stock Prices

The market price of a share of a company's stock, reflecting investor sentiment and company valuation at a given time.

Predictable Pattern

A consistent and repeatable sequence observed in data, activities, or behaviors over time.

Systematic Trends

Patterns or movements in data that consistently occur over a specified period, indicative of a broader phenomenon or change.

Equilibrium Price

The equilibrium price is the market price at which the quantity of goods supplied equals the quantity demanded, leading to a balance in the market.