When Is It Appropriate to Include Sunk Costs in the Evaluation

question 90

Multiple Choice

When is it appropriate to include sunk costs in the evaluation of a project?

• A)include sunk costs when they are relatively large
• B)include sunk costs if it improves the project's NPV
• C)include sunk costs if they are considered to be overhead costs
• D)it is never appropriate to include sunk costs

---

Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, reflecting the interest payable on any type of debt for a specific period.

Foreign Exchange Risk

The potential for losses due to fluctuating foreign exchange rates affecting investments or transactions in foreign currencies.

Loan Repayment

The process of paying back borrowed money to the lender, typically in regular installments over a set period.

Interest Rate

The percent of principal charged by the lender for the use of its money, or the amount earned on deposited funds.