1 Should the sales and the associated costs of 180 000 pairs of roller blades to be sold in Thailand under the existing agreement be included in the capital budgeting analysis to decide whether Blades should establish a subsidiary in Thailand?

Should the sales resulting from a renewed agreement be included? Why or why not?

Since Ben Holt, Blades’ financial director, believes the growth potential for the roller blade market in Thailand is very high, he, together with Blades’ board of directors, has decided to invest in Thailand. The investment would involve establishing a subsidiary in Bangkok consisting of a manufacturing plant to produce ‘Speedos’, Blades’ high-quality roller blades. Holt believes that economic conditions in Thailand will be relatively strong in ten years, when he expects to sell the subsidiary.