When Is It Appropriate to Include Sunk Costs in the Evaluation

question 40

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

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Definitions:

Common Stock

Equity owning in a firm that grants shareholders voting rights and a share in the company's profits, typically through dividends.

Database

A structured set of data held in a computer, especially one that is accessible in various ways, used for storing and managing information digitally.

Amortized

The process of gradually paying off a debt over a period of time through regular payments.