Question
1. Which of the following statements is most CORRECT regarding sunk costs? A) An example of a sunk cost is the cost associated with restoring
1. Which of the following statements is most CORRECT regarding sunk costs? A) An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted B) Sunk costs must be considered if the IRR method is used but if not the firm relies on the NPV method C) A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project D) A good example of a sunk cost is a situation where a bank opens a new office, and that new office leads to a decline in deposits of the banks other offices.
2. Anne wants to retire in 20 years, and she wants to have an annuity of $50,000 a year for 25 years after retirement. Anne wants to receive the first annuity payment the day she retires. Using an interest rate of 8%, the amount that Anne must invest today in order to have her retirement annuity is closest to:
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