Answered: In a capital budgeting study, explain…

In a capital budgeting study, explain why sunk costs should not be included, but opportunity costs and externalities should be. Give an example of each.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 4Q

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Explain why sunk costs should be excluded from a capital budgeting study while opportunity costs and externalities should. Please provide an example of each.
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