Veronica, a new CFO, wants to include costs from each phase of a project to understand its total expenditure from beginning to end. In project selection and financial analysis, this complete view of cost over all phases is known as what?

Introduction / Context:
Project financial analysis does not stop at initial development costs. Many organizations, especially those guided by PMI concepts, use life cycle costing to evaluate projects and products. This approach considers all costs incurred over the entire life of the project or product, including development, operation, maintenance, and disposal. PMP style questions often ask you to identify this concept and distinguish it from other financial measures like NPV, payback period, and opportunity cost.

Given Data / Assumptions:

• A CFO wants to consider costs from each phase of a project, not just the initial development cost.
• The goal is to understand total expenditures from beginning to end.
• The question is about the name of this complete, long term cost concept.
• We are using PMI style terminology for project financial analysis.

Concept / Approach:
Life cycle cost (sometimes called whole life cost) is the total cost of ownership of a project or product across its entire life cycle. This includes costs of initiation, development, operations, maintenance, support, and often retirement or disposal. Life cycle costing is used in project selection and evaluation to ensure that decisions are based on total costs, not just up front spending. It differs from NPV, which focuses on discounting cash flows, and from payback period, which looks at how quickly initial investments are recovered.

Step-by-Step Solution:
Step 1: Recognize that the CFO wants to capture costs from each phase of the project to get a full cost picture. Step 2: Recall that life cycle cost is the term used for total cost across all phases, from initiation through operation and closure. Step 3: Compare this to opportunity cost, sunk cost, NPV, and payback period, which represent different financial concepts. Step 4: Identify option D as the only answer that explicitly describes total cost over the entire life of the project or product. Step 5: Select life cycle cost as the correct concept for Veronica's analysis.

Verification / Alternative check:
In PMI based references, life cycle costing is suggested as a best practice for evaluating alternatives, especially in projects where operating and maintenance costs may be significant compared to initial development costs. For example, a system with a low purchase price but high maintenance costs might be less favorable than a more expensive system with lower operating expenses. Considering all these costs across the life cycle helps decision makers choose the better overall option. This confirms that life cycle cost is the correct term for Veronica's interest in total expenditure across phases.

Why Other Options Are Wrong:
Option A, opportunity cost, is about the value of the best alternative not chosen, not the sum of costs over a project's life. Option B, sunk cost, relates only to past, irrecoverable costs and does not include future phases. Option C, NPV, discounts future cash flows and can incorporate life cycle considerations but is not itself the synonym for total cost across phases. Option E, payback period, only measures how long it takes to recover initial costs and does not include all life cycle costs. Only option D matches the description in the question.

Common Pitfalls:
A common pitfall is confusing any long term financial measure with life cycle cost. While NPV and payback can use life cycle data, life cycle cost specifically emphasizes summing all costs across the entire life of the project or product. Another mistake is ignoring operational and maintenance costs when selecting projects, which can make an option look attractive in the short term but expensive over its lifetime. Understanding life cycle costing helps project managers and executives make more informed, long term decisions.

Final Answer:
The CFO is applying the concept of life cycle cost, which represents the total cost of a project or product over its entire life, across all phases.