Okay. Let's bring these terms to life in an example. Recall the T-shirt maker? Well, a mechanic just called to give the company some bad news. The transmission in the company's delivery truck needs replacing at a cost of $5000. How could this happen? The company just bought the truck two years ago for $25,000. So if they repair it, they will have to put $30,000 in that truck. They do a little research and realize that they could sell the truck as is and could buy a new one for $35,000. What should they do? At first glance, it looks like they should keep the old truck and repair it. The old truck cost $25,000 and it'll cost $5000 to repair it. That's $30,000 compared to the $35,000 if they buy the new one. But wait, if they buy the new truck they will get $15,000 from selling the old truck. That will happen in the future, and they'll only get that $15,000 if they choose the sell alternative. So that $15,000 is relevant to this decision. So we add that in as a benefit or a reduction in cost associated with the sell alternative. Now, alternatively, we could add it in as an opportunity cost associated with the keep alternative. It's a benefit that the company gives up by choosing to keep the old truck, but whether we added in as a benefit to the sell alternative or as an opportunity cost to the keep alternative doesn't matter in our decision. Either way, it makes the alternative of selling look $10,000 more attractive than the alternative of keeping. What is important is that we consider it because it differs between the two alternatives. So now, it looks like the company should sell the old truck and buy the new one. But wait, think about that $25,000 cost of the old truck. That's a cost the company incurred because of a past decision, and it can't be changed or avoided regardless of what they do. So that is a sunk cost and it will not differ between the two alternatives. So, it's not relevant. So now, I could strike out the $25,000 from the keep alternative or, I could add it into the sell alternative here. But either way, it's not a relevant cost because we incur it regardless of what the company does. So after properly dealing with that sunk cost, we see that it appears that the keep alternative is the better one to choose. Now, of course there may be some other non-financial factors to consider like the image associated with having a new truck and things like that. And there may be other financial things to consider, such as a new truck may have better gas mileage or lower expected maintenance cost and things like that and if that's the case, we should build those into our analysis because those are future costs that differ between the two alternatives. But here, I didn't do that because I'm simply illustrating the concept of sunk cost, future outlay cost and opportunity cost which we've done. So, in summary, when making a decision and choosing between alternatives, you want to focus on the cost and benefits that differ between the alternatives being considered. And if there is a cost or benefit that doesn't differ between two alternatives, then it shouldn't affect your decision about which alternative to choose. Future outlay costs and opportunity costs are usually relevant while sunk costs usually are not.