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Opportunity cost and sunk cost

Opportunity cost is the value of the best alternative given up by choosing something else, and should count in decisions even though it does not appear in the accounts. Sunk cost is expenditure already incurred and unrecoverable, and should therefore not influence future decisions.

Opportunity cost=value of best alternative\text{Opportunity cost} = \text{value of best alternative}included in the decision
Sunk cost→ignored in new decisions\text{Sunk cost} \to \text{ignored in new decisions}incurred, unrecoverable costs

Example

If 2 million kr has been spent on a project that is no longer profitable, that 2 million kr should not decide whether to continue — only future cash flows count.

"We've already spent so much" is a classic sunk-cost fallacy — what is spent is spent.
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Part of Engineering Economics: Costs and profitability.