Question

How should Happy Dog Soap incorporate the $1,500.00 marketing study cost into its project analysis?

A) Increase the NPV of the project by $1,500.00.
B) Increase the amount of the initial investment by $1,500.00.
C) The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost.

Answer 1

Happy Dog Soap should not include the marketing study cost in its project analysis because it is a sunk cost.

Step-by-step explanation:

Incorporating the $1,500.00 marketing study cost into Happy Dog Soap's project analysis depends on the nature of the cost. According to the options provided, the correct answer is C) The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost.

A sunk cost is a cost that has already been incurred and cannot be recovered. In project analysis, sunk costs should not be considered when making decisions because they have no future impact on the project's revenue or costs. Therefore, Happy Dog Soap should not include the marketing study cost in its project analysis as it is a sunk cost.