Opportunity costs should be considered when determining an investment's relevant cash flows because they represent the cost of the forgone alternative. Option A is incorrect because opportunity costs are not irrelevant, they are an important factor in decision making. Option C is incorrect because sunk costs are costs that have already been paid and are not relevant for future decisions.

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Opportunity Costs

Question 75

Multiple Choice

Opportunity costs:

A) are irrelevant.
B) should be considered when determining an investment's relevant cash flows.
C) are equal to the firm's sunk costs.
D) all of the above.

Correct Answer: