Are sunk costs irrelevant when considering two mutually excl

Are sunk costs irrelevant when considering two mutually exclusive future opportunities? Explain your answer.

Solution

Yes, sunk cost is irrelevant in decision making while considering two mutually exclusive future opportunity. Sunk costs or retrospective cost are the prior cost which is spent in past and it cannot effect current or future decisions. More ever sunk costs are past opportunity cost and cannot be retrievable partially or completely. Only future revenue and costs are relevant to an investment decision. Sunk cost should not be considered to influence the future decision whether the investment is economically justifiable.