A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of a(n):
A. Incremental cost.
B. Variable cost.
C. Out-of-pocket cost.
D. Opportunity cost.
E. Sunk cost.
Answer: E
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