$1.$ Consider the R&D expenses.$$

a$.$ Why aren$$t these expenses classified as $$sunk costs$?$

The $$7$ million allocated for research and development $($R&D$)$ is not viewed as a sunk cost because it includes $$5$ million that has been capitalized and will be amortized over the project's lifespan if it advances. Only the $$2$ million that has already been expensed for tax purposes qualifies as a sunk cost.$$