Opportunity costs and externalities


Question 1: Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included.

Question 2: What factors should a company consider when it decides whether to invest in a project today or to wait until more information becomes available?

Question 3: In general, do timing options make it more or less likely that a project will be accepted today? Explain.

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Finance Basics: Opportunity costs and externalities
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