Sunk costs: Difference between revisions

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''Project appraisal''.
''Project appraisal''.
Expenditure which has already taken place, or to which an organisation is already irrevocably committed, are sunk costs.
 
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.


== See also ==
== See also ==
* [[Contribution analysis]]
* [[Fixed cost]]
* [[Incremental cash flows]]
* [[Opportunity cost]]
* [[Project appraisal]]
* [[Project appraisal]]
* [[Sunk cost fallacy]]


[[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.


See also