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:

Market Rate of Interest

The prevailing interest rate available in the marketplace on loans, determined by the supply of and demand for funds.

Anti-Employment Discrimination Legislation

Laws designed to prevent unfair treatment of workers based on personal characteristics, such as the Civil Rights Act in the United States.

Female/Male Earnings Ratio

A metric comparing the average earnings of women to that of men, often used to explore gender wage disparities.

Female to Male Earnings Ratio

The comparison of the average earnings of women to the average earnings of men in the workforce, often used to evaluate gender wage gaps.