A Sunk Cost Is

question 132

Multiple Choice

A sunk cost is

• A)another term that means opportunity cost.
• B)a term used to describe the cost of capital that the owners of a firm sink into their business.
• C)the highest valued alternative that must be given up to engage in an activity.
• D)a cost that has already been paid and cannot be recovered.

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Definitions:

Borrowing Cost

A financial expense encompassing interest and other costs incurred by an entity in connection with the borrowing of funds.

Entity's Profits

The financial gain that remains after subtracting all expenses, taxes, and costs from a company's revenue.

Residual Interest

The interest remaining in a trust or estate once all prior obligations, claims, or interests have been satisfied.

Equity Instrument

Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.