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Essay / Research Paper Abstract
This 3 page paper considers whether or not sunk costs are ever relevant for decision-making purposes, why they may be argued as not relevant and the reasons why people often act as if they are relevant. The bibliography cites 2 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEsunkcost.rtf
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Unformatted sample text from the term paper:
higher the commitment level. This is often in response to the sunk costs and reflects the desire to make sure than the money which has been sunk into a project
or investment is going to make a positive return. There is a problem with this approach, this increasing level of commitment can be counter productive, it is not always logical
method of assessing whether or not to carry along on a particular course of a action as sunk costs may not always be a relevant input into the decision making
process. A sunk cost is a cost that has already been incurred and cannot be recouped. There are many examples of sunk costs, for example an old piece of
machinery may be a sunk cost, as it cannot be recouped and has been spent. Another form of sunk cost may be a cost such as insurance hat has been
paid and cannot be refunded, or the cost of purchasing and deprecating fixed asset, such as computers. The idea of sunk costs is the costs, which at any point; if
the company withdraws form the investment will be lost. It may appear logical to make a decision based on the inputs into a project and the outputs. The outputs
may change as condition change and as such should always be considered. In some circumstances may be that something which looked like a good investment may no longer be viable.
The general approach is that the investments should be considered without looking at the sunk costs. These are coasts which have been
occurred and will not change whatever decision is made, which makes then a neutral factor and one that does not have an influence on the outcome of a decision.
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