Why sunk cost should not be considered when evaluating a project?

Q: a. What is the IRR of cach alternative? b. What is the present value of costs of cach alternative?…

A: Capital budgeting is a technique that is used widely by companies to evaluate projects to make the…

Q: What is the chief drawback of the high-low method of cost estimation? What problem could an outlier…

A:

Q: Which type of incurred costs are not relevant in decision-making (i.e., they have no bearing on…

A: The costs that have already been incurred are known as Sunk costs. A sunk cost will not change…

Q: analysis? What are identified as possible risks associated with cost

A: Definition: A technique for calculating the costs related to a business prospect or proposal, as…

Q: How Analysis Period Differs from Project Lives?

A: Analysis period is the time period which is considered by the evaluator while assessing different…

Q: “Sunk costs are easy to spot—they’re the fixed costs associated with a decision.” Do you agree?…

A: The Sunk cost is a cost which has been incurred in the past and cannot be recovered and revoked back…

Q: In a replacement analysis, why are the previous costs irrelevant?

A: Replacement Analysis is a capital budgeting method that determines whether existing assets need to…

Q: What does the equipment replacement investment decision involve?

A: Equipment replacement investment decision is an important form of capital budgeting decisions. In…

Q: The MARR used for a project’s acceptance or rejection is set relative to what cost?

A: MARR is a discount return which is the lowest rate of return that must be accepted in the project.

Q: The potential benefit that is given up when one alternative is selected over another is called O a.…

A: Cost accounting is one of the important branch of accounting, under which all type of costs and…

Q: What factors verify that the project is marginally acceptable?

A: Capital budgeting decisions are generally taken for long-term purposes that are irrevocable.…

Q: What is the economic rationale for the cost approach? Under what conditions would the cost approach…

A: Answer: Economic rationale for cost approach: The cost approach means that the person who is…

Q: For the reader's advantage, provide a cost-benefit analysis of the project. How can the value of a…

A: An analysis is a systematic procedure used by businesses to determine which decisions to make and…

Q: How does the Analysis Period Differ from Project Lives?

A: In capital budgeting, the decisions are made to select the best alternative among various available…

Q: Describe the methods of determining the Project Risk?

A: Project risk is an uncertain event or circumstance that affects at any rate one objective of a task,…

Q: Distinguish between goal weights and historical weights in terms of how they are used to compute the…

A: Here Is The Answer:

Q: Future costs that do not differ among the alternatives are not relevant in a decision.

A: In accounting when it comes to making decisions we classify costs into different types or…

Q: Would you expect an abandonment option to increase or decrease a project’sexpected NPV and risk (as…

A: Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: What is the primary disadvantage of basing the costplus pricing formula on absorption cost?

A: Definition: Cost plus-pricing approach: The pricing approach used by the companies to set the target…

Q: Of the following costs related to the development of mi one is not a part of depletion cost?

A: Deplation Cost One of two accounting systems for allocating the costs of extracting natural…

Q: In which situation are the project lives unequal?

A: Answer: A business will face a situation where multiple capital projects display a positive net…

Q: What are the expected cost takedown rates?

A: When a company offers new issues in the market, such as stocks or bonds, they appoint an…

Q: Why can cost benefit analysis be difficult to carry out?

A: Introduction: Cost benefit analysis can be defined as a process which is undertaken by an…

Q: Why base measurement on historical costs?

A: Historical cost:   Historical cost explains that assets and liabilities appear in the financial…

Q: How weak reserch culture have an affect on Low potential investment? Explain in detail.

A: The low potential investment is also known as the low-risk investment. It refers to the investment…

Q: How to estimate the Residual Value?

A: Residual value means value of fixed asset left after the use of fixed assets. Residual value also…

Q: The cost of underwriting is sometimes assessed in terms of the costs of an equivalent PUT option.…

A: Underwriting costs: Means in respect of any underwriting agreement with broker,dealer or other…

Q: What is the Terminal project balance?

A: Project balance is the amount of money that is remaining in the project. Suppose a project is going…

Q: Why is an incremental analysis necessary when conducting a rate of return analysis for cost…

A: Incremental analysis considers only the relevant cash flows and it does not consider the…

Q: How do flexibility options affect projects’ NPVs and risk?

A: Fluctuations factors such as demand, interest rate levels are common which may affect future…

Q: Label each of the following statements as either true (“T”) or false (“F”). A sunk cost will change…

A: Sunk cost: It can be defined as an expense that has already been paid for and cannot be recovered in…

Q: What circumstances might create distortions where estimated costs are not an accurate representation…

A: The estimated costs are the costs determined through the estimation process on past…

Q: How can we use the PW criterion to compare the alternatives to minimize expenditures?

A: The full form of PW is present worth. Present worth is known as the present value of the investment…

Q: Which is the most important breakeven in the analysis of a project?

A: Projects could be analyzed by using net present value (NPV) method. In this method, projects are…

Q: What are the methods of describing Project Risk?

A: The project risk is an unpredictable occurrence or situation that has an effect on at least one…

Q: Why is there often a conflict between the performance evaluation and cost-minimization objectives of…

A: SOLUTION- TRANSFER PRICING   IS THE ACCOUNTING PRACTICE THAT REPRESENTS THE PRICE THAT ONE DIVISION…

Q: Explain why sunk costs are not considered in the analysis ofinvestment alternatives.

A: A sunk cost is also known as the retrospective cost, is a cost that cannot be recovered because it…

Q: What is the process of economically evaluating a project's desirability?

A: Project desirability is the desirability that differentiates the project from other ordinary…

Q: How useful is cost–benefit analysis?

A: A cost-benefit analysis, commonly known as CBA, is the process of comparing the various projects and…

Q: What are the Project Cost Elements?

A: The deliverables such as products or services that a project is intended to create defines the work…

Q: While an engineering manager may prefer to use CFAT estimates to evaluate the AW of a project, a…

A: EVA, which stands for economic value added, seems to be a term based on the notion that a…

Q: Illustrate the main factors of Project Risk?

A: The project risk is defined as the uncertain event or condition that occurs mainly on positive or…

Q: why is it important to keep current cost in lined with planned cost?

A: Current cost means the cost which we are incurring right now. Planned cost means the standard cost…

Q: Why is it costly to develop resources?

A: The cost of natural resources includes the cost of acquiring and preparing the resource extraction.…

Q: Why is cost important?

A: Cost - it means expenses incurred by an organisation to make an product whether it is direct cost or…