Evaluate the following statement: BioGeological Pharmaceuticals invested $100 million on a heart drug that does not prevent heart disease. BioGeological has since found that the drug does prevent diabetes. When considering whether to market the drug as a diabetic panacea, the firm should include the $100 million spent while investigating the heart-related effects.

Question

Quizplus · Accepted Answer

The $100 million spent on investigating the heart-related effects is a sunk cost and should not be considered in the decision to market the drug as a diabetic treatment. Sunk costs are past costs that cannot be recovered and should not influence future investment decisions.

Evaluate the Following Statement: BioGeological Pharmaceuticals Invested $100 Million on a Heart