11. Using an example of each, explain sunk costs and opportunity costs. Which of these costs...
11. Using an example of each, explain sunk costs and opportunity costs. Which of these costs should be included in incremental cash flows and which should be excluded?
Homework Answers
Sunk Costs are cost which can never be recovered The cost are
permanent in nature. These cost can never be recovered.
Example : Machinery, Equipment
Opportunity Costs are costs which are fore gone for the next best
investment opportunity .
E.g. Investment in Fixed deposit,etc.
Only Opportunity cost should be added and sunk costs should be
excluded.
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11. Using an example of each, explain sunk costs and opportunity
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