Sunk costs and opportunity costs masters golf products, inc., spent 2 years and $ 1 comma 050 comma 000 to develop its new line of club heads to replace a line that is becoming obsolete. to begin manufacturing them, the company will have to invest $ 1 comma 850 comma 000 in new equipment. the new clubs are expected to generate an increase in operating cash inflows of $ 744 comma 000 per year for the next 11 years. the company has determined that the existing line could be sold to a competitor for $ 256 comma 000. a. how should the $ 1 comma 050 comma 000 in development costs be classified? b. how should the $ 256 comma 000 sale price for the existing line be classified? c. what are all the relevant cash flows for years 0 thru 11? (note: assume that all of these numbers are net of taxes.)

Risk is the risk of a decline in a bond's value due to an increase in interest rates. this risk is higher on bonds that have long maturities than on bonds that will mature in the near future. risk is the risk that a decline in interest rates will lead to a decline in income from a bond portfolio. this risk is obviously high on callable bonds. it is also high on short-term bonds because the shorter the bond's maturity, the fewer the years before the relatively high old-coupon bonds will be replaced with new low-coupon issues. which type of risk is more relevant to an investor depends on the investor's , which is the period of time an investor plans to hold a particular investment. longer maturity bonds have high risk but low risk, while higher coupon bonds have a higher level of risk and a lower level of risk. to account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called , which is the weighted average of the time it takes to receive each of the bond's cash flows. conceptual question: which of the following bonds would have the largest duration? a)10year-zero coupon bonds b)10year-7% annual coupon bonds c)10year-3% annual coupon bonds d)5year-3% annual coupon bonds e)3year-7% annual coupon bonds