Question $1$

Homework $*$ Unanswered $*$ Due Today, $11$:$59$ PM

You discover that a glue your company developed ten years ago can be formed into a super bouncy ball if cooked at the right temperature. How should you treat the original $$125,000$ of $R$&$D$ expenditures that went into developing the glue in your present capital budgeting decision of whether or not to begin production of the balls?

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a As a cash outflow at the beginning of the project

b The full $$125,000$ plus the costs involved in the discovery of the glue's use as a ball should be treated as initial investment

As a sunk cost since that R&D expenditure has no bearing on today's decision

d As a sunk cost only if the formula cannot presently be sold to another manufacturer

As a cash inflow since the formula has obviously increased in value over the years

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