The basic capital budgeting principles involved in determining after-tax incremental operating cash flows require us to:
A)include sunk costs, but ignore opportunity costs.
B)include opportunity costs, but ignore sunk costs.
C)ignore both opportunity costs and sunk costs.
D)include both opportunity and sunk costs.

Question

Quizplus · Accepted Answer

The basic capital budgeting principles involved in determining after-tax incremental operating cash flows require us to include opportunity costs, but ignore sunk costs. Opportunity costs are the benefits foregone by choosing one investment option over another, while sunk costs are costs that have already been incurred and cannot be recovered. Therefore, sunk costs are not relevant to the decision-making process.

The Basic Capital Budgeting Principles Involved in Determining After-Tax Incremental