Question

The following quotes are most closely related to which financial concept?

“Never look back unless you are planning to go that way.”     -Henry David Thoreau

“Start wide, expand further, and never look back.”     -Arnold Schwarzenegger

“Don't look back unless it's a good view.”     -Tupac Shakur

Multiple choice question please select only one answer:  

a. Competition

b. Sunk Costs

c. Separation of the investment and financing decisions

d.
Diversification.

e.
Opportunity costs.

Answer 1

These quotes are most likely related to the concept of sunk cost. Sunk cost is the cost which once when occurred cannot be changed so when we are evaluating new project sunk cost should not be considered. Separation of investment and financing decision, high competition, opportunity cost and diversification are all relevant concept when considering investment in new project and are given due emphasis but sunk cost are ignored. So, the correct answer is

b) Sunk cost

when a ne project is evaluated then its cash flow should consider incremental (future oriented) and sunk cost should not be considered.