The Rationale for Not Including Sunk Costs in Capital Budgeting

question 91

Multiple Choice

The rationale for not including sunk costs in capital budgeting decisions is that they:

• A) are usually small in magnitude.
• B) revert at the end of the investment.
• C) have no incremental effect.
• D) reduce the estimated NPV.

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Definitions:

Anal Expulsive

A term from Freudian psychoanalysis referring to a personality type that emerges from an unorganized and lenient approach to toilet training, often resulting in a messy, careless, or defiant character.

Oedipus Complex

A conflict of the phallic stage in which the boy wishes to possess his mother sexually and perceives his father as a rival in love.

Electra Complex

A psychoanalytic concept, proposed by Freud, suggesting a girl's sense of competition with her mother for the affections of her father.

Social Cognitive Theory

A theoretical framework that emphasizes the role of observational learning, social experience, and reciprocal determinism in the development of personality and behavior.