When is it appropriate to include sunk costs in the evaluation of a project?
A)include sunk costs when they are relatively large
B)include sunk costs if it improves the project's NPV
C)include sunk costs if they are considered to be overhead costs
D)it is never appropriate to include sunk costs

Question

Quizplus · Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. They should not be included in the evaluation of a project because they are not relevant to future decision making. The focus should be on the prospective incremental costs and benefits of the project.

When Is It Appropriate to Include Sunk Costs in the Evaluation