Solved

Which of the Following Would Not Constitute a Sunk Cost

Question 9

Multiple Choice

Which of the following would not constitute a sunk cost?


A) The purchase price of $250,000 for a new printing machine after a successful bid for additional advertising print work that will generate for the printing company an estimated $430,000 in net cash flows per year for the next 3 years.
B) The clean- up costs of $450,000 on a block of industrial land contaminated by industrial waste ordered by the Environment Protection Agency (EPA) .This land could then be used to build twelve luxury townhouses at a cost of $3.8 million which would then be sold one year later (after they are constructed) for $930,000 each.
C) A fee of $50,000 paid to a marketing company for assessing the feasibility of a potential casino project that has an outlay of $250 million and is expected to produce net cash flows of $10.3 million per year for 20 years.
D) The purchase price of $1.23 million for block of land five years ago that could be used for a new factory costing $2.35 million to construct and which is expected to produce net cash flows of $0.945 million per year for 5 years.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents