Which of the following represents an example of a sunk cost decision?

A sunk cost decision involves financial investments that have already been made and cannot be recovered. The correct choice illustrates this concept perfectly with the idea of continuing to invest in a failed project. In this case, the money that has already been spent on the project cannot be recouped, and thus, any further investment should ideally not be influenced by the costs that are already sunk.

This decision should be based on future potential benefits rather than past expenditures. By recognizing that previous costs are sunk, one can make more rational financial decisions moving forward, focusing on the potential outcomes rather than past losses. This understanding plays a critical role in business decision-making, as it helps to prevent the common pitfall of further investment based on emotional attachment to previous efforts rather than logical analysis of future gains.