why didn't we calculate the 5 million? why are they considered "sunk costs"? thank you

8) CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $4 million, which will be depreciated by straight-line depreciation over six years. In addition, there will be $5 million spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of $6 million per yeat for five years with production and support costs of $1.5 million per year. If CathFoods' marginal tax rate is 35%, what are the incremental earnings in the second year of this project? A) $2.492 million B) $2.100 million C) $3.833 million D) $1.342 million Answer: A Explanation: Depreciation =4/6=$0.66666667 million; earnings before tax=$6$1.5$0.66666667=$3.83333333 million; earnings after tax=$3.833333330.65=$2.492 million Diff: 1 Var: 12 Skill: Analytical AACSB Objective: Analytic Skills