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:

Income Yield

The income returned on an investment, usually expressed as a percentage of the amount invested.

Cumulative Gain

The total amount of profit gained over a period of time from an investment or series of investments.

Semi-Annual Dividend

A payment made to shareholders that is distributed twice a year from a company's earnings.

Total Return

The overall gain or loss on an investment over a specified time period, including interest, dividends, and capital gains.