Question
Side effects from investing in a project refer to cash flows from Blank______.
Multiple select question.
sunk costs
erosion effects
opportunity costs
beneficial spillover effects
Multiple select question.
sunk costs
erosion effects
opportunity costs
beneficial spillover effects
Answers
GPT-4o mini
In the context of investing in a project, side effects generally refer to cash flows from:
- **Erosion effects**: These are negative impacts on existing cash flows from other projects or lines of business as a result of the new investment.
- **Opportunity costs**: These represent the potential benefits that are foregone from not investing in the next best alternative.
- **Beneficial spillover effects**: These are positive impacts on other projects or cash flows resulting from the investment.
**Sunk costs** are not considered side effects, as they refer to costs that have already been incurred and cannot be recovered, which should not influence decision-making for future investments.
So the correct answers are:
- Erosion effects
- Opportunity costs
- Beneficial spillover effects
- **Erosion effects**: These are negative impacts on existing cash flows from other projects or lines of business as a result of the new investment.
- **Opportunity costs**: These represent the potential benefits that are foregone from not investing in the next best alternative.
- **Beneficial spillover effects**: These are positive impacts on other projects or cash flows resulting from the investment.
**Sunk costs** are not considered side effects, as they refer to costs that have already been incurred and cannot be recovered, which should not influence decision-making for future investments.
So the correct answers are:
- Erosion effects
- Opportunity costs
- Beneficial spillover effects