31·(0.5 pt.) Which of the following statements is CORRECT? a. Sunk costs must be

Question

31·(0.5 pt.) Which of the following statements is CORRECT? a. Sunk costs must be considered if the IRR method is used but not if the firm relies on the NPV method. b. A good example of a sunk cost is a situation where a bank opens a new office, and that new office leads c. A good example of a sunk cost is money that a banking corporation spent last year to investigate the site to a decline in deposits of the bank's other offices. for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward d. If sunk costs are considered and reflected in a project's cash flows, then the project's calculated NPV e. An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has with the project. will be higher than it otherwise would be. been depleted.

Explanation / Answer

Option c is correct

As sunk cost is not included in npv or irr calculation option a and d is wrong, sunk cost incurr prior to start of the project so option b and e is wrong

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