A pharmaceutical company is deciding whether to continue developing a drug for which it has already spent $$10$ million in research and development. How should the $$10$ million already spent be treated in the project's free cash flow analysis?

Include the $$10$ million as part of the project's initial cash outflows.

Treat the $$10$ million as an opportunity cost in the analysis.

Allocate the $$10$ million proportionally over the project's expected lifespan.

Ignore the $$10$ million, as it is a sunk cost and does not impact future cash flows.