John invested $12,000 in the stock of Hyper Cyber.Eight years later,Hyper Cyber's shares reached $125,000,but John held onto the shares in the belief that their price would double in the next five years.Unfortunately,Hyper Cyber did not double.Instead,the market value of John's shares today is $4,000.If the shares were sold and the proceeds invested in another investment,they would likely earn 5% per annum.Which of the following terms and values is correct?

A) $125,000 is the opportunity cost of selling the shares today
B) $12,000 is a sunk cost
C) $125,000 is a sunk cost and is not relevant
D) $6,250 is the opportunity cost of not selling the shares earlier
E) None of the above

Question

Kenzy Valentine · Accepted Answer

Final Answer : B, Explanation :  Sunk cost refers to money that has already been spent and cannot be recovered. In this scenario, the $12,000 initially invested by John is a sunk cost because it has already been spent on purchasing the shares and cannot be recovered through future decisions.

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