Why sunk costs should not be included in capital budgeting

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1. A company is launching a new service. The service is expected to reduce sales of two existing services the company offers. We would characterize the expected effect on other services as:

2. Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. Give an example of each.

3. Why are interest charges not deducted when a project’s cash flows for use in a capital budgeting analysis are calculated?

Reference no: EM132048026

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