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 to a decline in deposits of the bank's other offices.
C. A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project.
D. If sunk costs are considered and reflected in a project's cash flows, then the project's calculated NPV will be higher than it otherwise would be.
E. An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted.
Answer: C
You might also like to view...
Identify and describe the three types of objectives retailers might have in the strategic planning process.
What will be an ideal response?
An important idea behind the 'profit pool' concept is that there is always a strong relationship between the generation of revenues and the capturing of profits.
Answer the following statement true (T) or false (F)
Which of the following is the focus of pull marketing at the growth stage of the product life
cycle? A) showing how the organization's product is superior to others in the market B) educating consumers on the benefits of the new product C) cutting costs of promotion by eliminating pull marketing efforts D) offering incentives such as sales promotions to consumers for using the product
Hardhat Machine Company sold goods to Irish Eyes Company of Northern Ireland. Big Bank issued a letter of credit on behalf of Irish Eyes and the letter was given to Hardhat. The "account party" is:
a. Irish Eyes. b. Hardhat Machine Company. c. Big Bank. d. None of the above.