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"You are considering the idea of producing face masks that provide appropriate protection but still allow...

"You are considering the idea of producing face masks that provide appropriate protection but still allow the wearer to drink from a straw. To gauge possible customer interest, you just paid a marketing firm $500 to research the possible customer demand for this type of product. Which of the following is true?"

The $500 should be included as a negative cash flow since it is an opportunity cost

The $500 should be included as a negative cash flow since it is a negative externality

The $500 should be included as a positive cash flow since it is a positive externality

The $500 should not be included as a negative cash flow since it is a sunk cost
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Answer #1

Answer : The answer is option D.

Here $500 is invested for research. This $500 cannot be recovered. So, here $500 is a sunk cost. Hence $500 should not consider as negative cash flow. For this reason except option D other options are not correct. Therefore, option D is the correct answer.

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