The sunk-cost dilemma
The sunk-cost dilemma means choosing between continuing a project that already has considerable sunk costs, or discontinuing the project altogether; sunk costs lie at the heart of one of the biggest issues in today's project business environment: the improper termination of projects. This article discusses how to ignore sunk costs and the past when deciding to cancel a project. In doing so, it overviews how sunk costs are used to terminate a project, notably when projects aren't performing well from a cost perspective. It then looks at project cancellations based on past impressions like anger, dissatisfaction, and embarrassment. The article overviews the role of forward thinking by weighing the project's future costs against its anticipated future benefits. It identifies an important rule of thumb when considering the benefits in the analysis of a project's profitability, effective yield or any other measurement of financial strength.