A company is expanding and has already signed a lease on new office space that c

Question

A company is expanding and has already signed a lease on new office space that costs $10,000 per month. The company also needs a new information system and hired a consultant to recommend new software. The consultant was paid $5,000 for her recommendation. Now the company is trying to make a choice between three competing software products. Is the capital budgeting decision to purchase new software, the monthly rent for the office space is ____ and the consultants fee is___

a. A sunk cost; part of the initial outlay

b. Incremental cash outflow, an opportunity cost

c. A sunk cost; a sunk cost

d. An opportunity cost; a sunk cost

Explanation / Answer

a. A sunk cost; part of the initial outlay

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