An example of a sunk cost in a capital budgeting decision for new equipment is:

Question

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The book value of the old equipment is a sunk cost because it is a cost that has already been incurred and cannot be recouped. When making a capital budgeting decision for new equipment, it is important to focus on future costs and benefits rather than past costs that cannot be changed. A, C, and D may be relevant costs to consider in the decision, but they are not sunk costs.

An Example of a Sunk Cost in a Capital Budgeting