The statement "We've got too much invested in that project to pull out now" possibly illustrates the need to:
A) switch to an accelerated method of depreciation.
B) recognize sunk costs.
C) reduce net working capital assigned to the project.
D) reduce discount rates to improve NPV.

Question

Quizplus · Accepted Answer

The statement suggests that the decision to continue with the project is being based on the amount of resources already invested in it, rather than on the potential for future profits. This is an example of the sunk cost fallacy, where past costs that cannot be recovered are given too much weight in decision-making. Recognizing sunk costs would allow for a more rational evaluation of the project's profitability going forward.

The Statement "We've Got Too Much Invested in That Project