John invested $12,000 in the stock of Hyper Cyber Eight years later, Hyper Cyber's shares reached $125,000, but John held onto the shares in the belief that their price would double in the next five years. Unfortunately, Hyper Cyber did not double. Rather the market value of John's shares today is $4,000. If the shares were sold and the proceeds invested in another investment, they would likely earn 5% per annum. Which of the following terms and values is correct?

Question

Quizplus · Accepted Answer

The sunk cost is a cost that has already been incurred, and it cannot be recovered. In this case, John invested $12,000 in Hyper Cyber eight years ago, and this cost is a sunk cost because it has already been incurred, and it cannot be recovered. Option A, C, and D are incorrect because they are either the market value of the shares at a specific time or the opportunity cost that John could have incurred if he had sold the shares at a specific time. However, the question asks for the correct term and value for John's initial investment in Hyper Cyber.

John Invested $12,000 in the Stock of Hyper Cyber Eight