Sunk costs when making capital budgeting decisions

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Reference no: EM132025499

1. Real options, such as the option to expand a lucrative project, cancel an underperforming project, or delay a project until the market is ready for it always increase the value of a project (options can never reduce the value of a project) and should always be included in capital budgeting decisions.

True or False?

2. In the following list of items, select all of those that are sunk costs when making capital budgeting decisions.

A hiring bonus paid to employees that will be part of a new project if the project is accepted, or laid off if the project is rejected.

A marketing study conducted to estimate future sales, if the project is accepted.

The market value of some land that may be used for a new project, or sold if the project is rejected.

The original purchase price of some land that may be used for a new project, or sold if the project is rejected.

Reference no: EM132025499

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