A company owns a building that is totally paid for. This building has been sitting idle for the past three years. Now the company is trying to analyze a project that would include the use of this building. Therefore, the insurance paid on the building over the past three years should be included in that analysis.

Question

Quizplus · Accepted Answer

The insurance paid on the building over the past three years is a sunk cost and should not be included in the analysis of a new project, as sunk costs are past costs that cannot be recovered and should not influence future investment decisions.

A Company Owns a Building That Is Totally Paid For This