"Mr. Stone, I must say you are making a mistake. I know you have spent $6,000 on research and development to develop this project, but that money must not be used as a negative cash flow of the project." Apparently, Mr. Stone does not understand the concept of:
A)side-effect costs.
B)opportunity costs.
C)sunk costs.
D)variable costs.
E)depreciation not taken.

Question

Quizplus · Accepted Answer

The statement mentions that the money spent on research and development is a sunk cost, which refers to a cost that has been already incurred and cannot be recovered. The fact that Mr. Stone is considering using this as a negative cash flow suggests that he does not understand the concept of sunk costs.

"Mr Stone, I Must Say You Are Making a Mistake