Asked by
Tanvi Maini
on Dec 01, 2024Verified
Sunk costs are monies that have already been spent at the time of the capital project analysis and cannot influence the future regardless of the decisions about the project.
Sunk Costs
Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.
Capital Project
A long-term investment undertaken to build, add or improve on a capital asset such as buildings or infrastructure, with the expectation of enhancing value.
- Understand the irrelevance of sunk costs and the relevance of taxes in capital budgeting decisions.
Verified Answer
PB
Learning Objectives
- Understand the irrelevance of sunk costs and the relevance of taxes in capital budgeting decisions.