Sunk costs are cash outlays that have already been made and therefore have no effect on the cash flows relevant to the current decision. As a result, sunk costs should not be included in a project's incremental cash flows.

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. Since they are not relevant to future decision making, they should not be included in a project's incremental cash flows.

Sunk Costs Are Cash Outlays That Have Already Been Made