Sunk costs, but not taxes, are irrelevant to the evaluation of a capital budgeting project.

Name: Sunk costs, but not taxes, are irrelevant to the evaluation of a capital budgeting project.
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Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, therefore they should not be considered in the decision to undertake a capital budgeting project. Taxes, on the other hand, are an important consideration as they affect the future cash flows of the project.

Sunk Costs, but Not Taxes, Are Irrelevant to the Evaluation