If an investment project would make use of land that the firm currently owns,the project should be charged with
A)a sunk cost.
B)an opportunity cost.
C)amortisation.
D)interest.

Question

Quizplus · Accepted Answer

Since the land is currently owned by the firm, it represents an opportunity cost for using the land for the investment project instead of using it for an alternative purpose. As such, the investment project should be charged with an opportunity cost. Option A (sunk cost) is incorrect because the cost of the land is not an expense that has already been incurred and cannot be recovered. Option C (amortization) and D (interest) are also incorrect as they do not capture the cost of using the land for the investment project.

If an Investment Project Would Make Use of Land That