Fox Entertainment is evaluating the NPV of launching a new iPet product.Fox paid a market research firm $120,000 last year to test the market viability of iPet.Fox Entertainment should treat this $120,000 as a ____ for the capital budgeting decision now confronting the firm.

Question

Quizplus · Accepted Answer

The $120,000 paid to the market research firm is a sunk cost because it has already been incurred and cannot be recovered. Therefore, it should not be factored into the capital budgeting decision of whether to launch the iPet product or not.

Fox Entertainment Is Evaluating the NPV of Launching a New