Certain expenditures associated with a project should not be included in capital budgeting cash flows. Such expenditures, referred to as sunk costs, might include:
A)the cost of an existing resource that will no longer be available for other uses.
B)a costly market study previously undertaken to determine the viability of the project.
C)Both a and b
D)Neither a nor b

Question

Quizplus · Accepted Answer

Sunk costs are past costs that have already been incurred and cannot be recovered. A market study previously undertaken is a sunk cost because it was incurred before the decision to proceed with the project.

Certain Expenditures Associated with a Project Should Not Be Included