Question

A __________ cost is a cost that has already occurred and should not be used in...

A __________ cost is a cost that has already occurred and should not be used in calculating the NPV of a project.

C. opportunity
B. sunk
D. none of the above
A. property, plant and equipment
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

B. Sunk cost:

Sunk cost is a cost that cannot be changed in future. It will incurr irrespective of activities you are going to perform in future so it is irrelevant for decesion making. So while calculating NPV sunk cost not considered.

Opportunity costs are the benefits foregoing to earn more return on investment.
Even though you can profit by investing in a particular project you are losing it and investing elsewhere more profit can earn more than the previous one so these will consider in NPA Computation.

and purchase of an equipment makes cash outflow as there is no purchase no outflow of cash. Hence the purchase of equipment is considered in calculating NPA

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the...
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the past and doesn’t affect decision making. A relevant cost differs between alternatives and is used in decision making. b. A relevant cost occurred in the past and doesn’t affect decision making. A sunk cost differs between alternatives and is used in decision making. c. Both costs are used is decision making. d. Neither cost is used in decision making. What is true of opportunity...
A firm is already has a factory that can be used for a project. If the...
A firm is already has a factory that can be used for a project. If the factory can be leased at $500,000 per year. The annual opportunity cost of the property for the project is _____. We assume the corporate tax rate is 40%. $0 $200,000 $300,000 $500,000
Which of the following statements is CORRECT? a.   A sunk cost is any cost that must be...
Which of the following statements is CORRECT? a.   A sunk cost is any cost that must be expended in order to complete a project and bring it into operation. b.   A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered regardless of whether the project is accepted or rejected. c.   A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with...
A company is considering replacement of manufacturing equipment with computer controlled equipment, at a cost of...
A company is considering replacement of manufacturing equipment with computer controlled equipment, at a cost of $500,000, replacing equipment with a scrap value of $50,000. This will reduce defect costs by $150,000 a year. At the end of 7 years, the equipment will be replaced and will have a scrap value of $100,000. The interest charges for financing the purchase will be $25,000 a year. The new system will be housed in a building that is currently unused, with an...
Should depreciation expense related to equipment already purchased be considered a relevant cost
Should depreciation expense related to equipment already purchased be considered a relevant cost
1. If the United State government has to pay a slightly higher rate on its debt...
1. If the United State government has to pay a slightly higher rate on its debt the risk free rate will? A. Rise greatly c. increase at risk coefficient B. Stay the same D. decrease slightly E. none of the above 2. If the IRR is 4.20% and NPV =0 and the discounted cash flows are as follows year 1) 100,000 year 2) 135,000 and year 3) 175,000.00 what are the initial costs? A. 410,000.00 C. 1 E. none of...
Sallys firm produces granola bars with a fixed cost of 10 (this cost is already sunk)....
Sallys firm produces granola bars with a fixed cost of 10 (this cost is already sunk). Her variable cost function is V C = y2 + 2y. (a) If she can sell granole bar for 6, how many bars should Sally produce? (b) What is Sallys revenue if the market price is 6? What is her profit? Does she want to stay in this market? Explain. SHOW WORK!
5. Sallys firm produces granola bars with a fixed cost of 10 (this cost is already...
5. Sallys firm produces granola bars with a fixed cost of 10 (this cost is already sunk). Her variable cost function is V C = y ^2 + 2y. (a) If she can sell granole bar for 6, how many bars should Sally produce? (b) What is Sallys revenue if the market price is 6? What is her profit? Does she want to stay in this market? Explain
Opportunity cost.  Revolution Records will build a new recording studio on a vacant lot next to...
Opportunity cost.  Revolution Records will build a new recording studio on a vacant lot next to the operations center. The land was purchased five years ago for ​$490,000. ​ Today, the value of the land has appreciated to ​$800,000. Revolution Records did not consider the value of the land in its NPV calculations for the studio project​ (it had already spent the money to acquire the land long before this project was​ considered). The NPV of the recording studio is...
Suppose Mr. Agirich has decided to buy a center pivot irrigation system but can't decide between...
Suppose Mr. Agirich has decided to buy a center pivot irrigation system but can't decide between buying a new or used system. Mr. Agirich has determined that the NPV(new)=$4,500 and the NPV(used)=$2,000. Mr. Agirich wants to choose the new system because it has a higher NPV but is not sure because he has heard that NPV is not the correct criterion for investment comparisons if the investments have different economic lives. Suppose Mr. Agirich learns that you have taken a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT