Please explain the difference between a sunk cost and an opportunity cost and give an example of each type of cost
What will be an ideal response?
Sunk costs are cash outlays that have already been made (past outlays) and cannot be recovered. Sunk costs have no effect on the cash flows relevant to the current decision. As a result, sunk costs should not be included in a project's incremental cash flows.
Opportunity costs are cash flows that could be realized from the best alternative use of an asset that is already in place. They, therefore, represent cash flows that will not be realized as a result of employing that asset in the proposed project. Thus, any opportunity costs should be included as cash outflows when one is determining a project's incremental cash flows.
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Explain "feedback fatigue."
What will be an ideal response?
______ is an organizational style characterized by formalized rules and regulation, specialized routine tasks, division of labor, and centralized authority.
A. Work specialization B. Formalization C. Span of control D. Bureaucracy
The price associated with a resource that indicates how much more profit would be earned by increasing the amount of the resource by one unit is called ______.
a. final cost b. reduced cost c. shadow price d. single price
In this problem, we admit only one real-world factor in an otherwise ideal capital market. This real world factor is corporate taxation; specifically that interest payments on debt are deductible while dividend payments are not deductible
Suppose Delaware East, Inc has until now been an all-equity firm with a market value of $100 mn. Now, the firm decides to increase its leverage by issuing $40 mn. in debt, with the proceeds being used to pay a dividend to shareholders. Assuming that this debt will be a permanent part of the firm's capital structure, and that the firm's tax rate is 34%, and accounting for the deductibility of the interest on the debt, what is the total market value of the firm after the recapitalization? a. $113.6 mn. b. $100 mn. c. $73.6 mn. d. $13.6 mn. FORMULA: VL=VU+?cD