Which of the Following Statements Is CORRECT

question 42

Multiple Choice

Which of the following statements is CORRECT?

• A) sunk costs must be considered if the irr method is used but not if the firm relies on the npv method.
• B) a good example of a sunk cost is a situation where a bank opens a new office, and that new office leads to a decline in deposits of the bank's other offices.
• C) a good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project.
• D) if sunk costs are considered and reflected in a project's cash flows, then the project's calculated npv will be higher than it otherwise would be.
• E) an example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted.

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