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What are the fixed costs and what are the sunk costs

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Reference no: EM132015044

Tiger Beer has a single plant that it built for 100 million dollars in 2010. Each year it has a loan repayment of 6 million to pay off the loan it took out to finance the plant. The plant itself is fairly specialized and has zero scrap value, but it has some equipment that is worth 10 million if the plant is closed and sold off. Each year Tiger Beer enters into a bulk electricity and water contracts for which they pay 2 million upfront for all the electricity and water they want. Their marginal cost, which is mostly labor, maintenance and ingredients (Barley, Hops and Yeast) is 2 per unit.

What are the fixed costs and what are the sunk costs?

Reference no: EM132015044

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