Question

When analyzing a proposed project, a cash flow that is unaffected by the decision to accept or reject the project is called:

O an opportunity cost.
O an incremental cash flow.
O a financing cost.
O a sunk cost.
O the after-tax salvage value.

Answer 1

In the context of analyzing a proposed project, Sunk cost isa the correct answer.

Step-by-step explanation:

In the context of analyzing a proposed project, a cash flow that is unaffected by the decision to accept or reject the project is called a sunk cost.

Sunk costs are costs that have already been incurred and cannot be recovered. When making decisions about a project, it is important to focus on the future costs and benefits instead of the sunk costs.

For example, if a company has already spent money on research and development for a product, that cost is considered a sunk cost. When deciding whether to launch the product, the company should not include the sunk cost in its analysis. Instead, it should focus on the incremental cash flows that will result from launching the product.