A Company Is Expanding and Has Already Signed a Lease

question 25

Multiple Choice

A company is expanding and has already signed a lease on new office space that costs $10,000 per month.The company also needs a new information system and hired a consultant to recommend new software.The consultant was paid $5,000 for her recommendation.Now the company is trying to make a choice between three competing software products.In the capital budgeting decision to purchase new software,the monthly rent for the office space is ________ and the consultant's fee is ________.

• A) a sunk cost; a sunk cost
• B) an opportunity cost; a sunk cost
• C) incremental cash outflow; an opportunity cost
• D) a sunk cost; a part of the initial outlay

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Definitions:

Trading Day

A Trading Day is a day on which stock exchanges are open for trading, typically excluding weekends and public holidays.

Standard Deviation

Standard deviation is a statistical measure that quantifies the amount of variation or dispersion of a set of data values.

Return Volatility

A quantitative assessment of the spread of returns for a specific security or market index.

Treasury Bills

Short-term government securities with maturity periods typically of one year or less, considered a low-risk investment.