(Sunk costs) We return to the sunk cost example of Section 6.2. You have invested $100,000 in a badly built house. For $20,000 invested today, you can fix up the house and sell it 1 year from today for $90,000. As an alternative, you can sell the house today for $60,000.

a. Should you take into account the $100,000 cost already invested in the house?

b. If the relevant discount rate is 9%, which alternative should you prefer?

c. What is the discount rate that makes you indifferent between the two alternatives?