Home › CA Inter › Financial Management › Capital Budgeting Basics › Sunk costs in capital budgeting are:
Sunk costs in capital budgeting are:
AIrrelevant because they have already been incurred
BRelevant
CAlways included
DSubtracted from NPV
Answer & Solution
Correct answer: A. Irrelevant because they have already been incurred
1. Sunk costs = expenses already incurred regardless of project decision.
2. They are NOT affected by current decision — hence irrelevant.
3. Including them biases the analysis.
_Source: ICAI BoS CA Inter Paper 6A, Ch 7 "Investment Decisions", §5_