1.7 - Defining Sunk Cost
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Practice Questions
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Define sunk cost.
💡 Hint: Think about money spent on a service or product that you can no longer use.
Why should sunk costs not influence current decisions?
💡 Hint: Consider how what was spent influences future expenses.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is a sunk cost?
💡 Hint: Remember, it's about irrecoverable money.
True or False: Sunk costs should influence your decision to replace old equipment.
💡 Hint: If you've already spent it, should it impact tomorrow's choices?
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Challenge Problems
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A company bought a software system for $150,000. After two years, its market value drops to $80,000. If they continue investing in updates costing $20,000 a year, at what point should they consider replacing it?
💡 Hint: Focus on performance and savings, not the original price.
Your friend spent $40,000 on a used car. Now, it's worth $15,000, and they're considering a new car worth $25,000. What advice would you give about the sunk cost?
💡 Hint: Consider how much usage they get from the current versus the future possibilities.
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