Sunk costs: Difference between revisions
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imported>Doug Williamson (Link with Contribution analysis page.) |
imported>Doug Williamson (Expand definition.) |
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''Project appraisal''. | ''Project appraisal''. | ||
Sunk costs are expenditure which has already taken place, or to which an organisation is already irrevocably committed. | |||
A sunk cost is one which cannot be recovered or reversed. | |||
Sunk costs are irrelevant to project appraisal: "Sunk costs don't count." | Sunk costs are irrelevant to project appraisal: "Sunk costs don't count." | ||
A common mistake in project appraisal and analysis is the inclusion - in error - of sunk costs in the analysis. | A common mistake in project appraisal and analysis is the inclusion - in error - of sunk costs in the analysis. | ||
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== See also == | == See also == | ||
* [[Contribution analysis]] | * [[Contribution analysis]] | ||
* [[Fixed cost]] | |||
* [[Incremental cash flows]] | |||
* [[Opportunity cost]] | |||
* [[Project appraisal]] | * [[Project appraisal]] | ||
* [[Sunk cost fallacy]] | |||
[[Category:Corporate_finance]] | [[Category:Corporate_finance]] | ||
Latest revision as of 16:46, 10 August 2021
Project appraisal.
Sunk costs are expenditure which has already taken place, or to which an organisation is already irrevocably committed.
A sunk cost is one which cannot be recovered or reversed.
Sunk costs are irrelevant to project appraisal: "Sunk costs don't count."
A common mistake in project appraisal and analysis is the inclusion - in error - of sunk costs in the analysis.
