Research has shown that in framing capital investment decisions past (i.e., "sunk") costs or losses tend to:
A) Have no discernible impact on decisions by managers.
B) Have a slight impact on the decision-making process.
C) Have an impact only when capital funds are limited.
D) Escalate commitment in making capital budgeting decisions.
E) Have a significant impact, but only when dealing with mutually exclusive investment projects.

Question

Quizplus · Accepted Answer

Sunk costs tend to escalate commitment to a project, leading managers to continue investing in it even when future outcomes are questionable. This phenomenon is also known as the "sunk cost fallacy."

Research Has Shown That in Framing Capital Investment Decisions Past