Question
A&W is considering the launch of a new product aimed at its young clientele under the age of 10. A market study was conducted at
A&W is considering the launch of a new product aimed at its young clientele under the age of 10. A market study was conducted at a cost of $20,000. The study found that the project will require an additional initial investment of $100,000, will last 3 years, and will generate future net cash flows with a present value of $150,000.
Which of the following is correct?
a) The $20,000 fee is a variable cost that should be considered when evaluating the project
b) The $20,000 fee is a fixed cost that should be considered when evaluating the project
c) The $20,000 fee is an opportunity cost that should not be considered in the evaluation of the project
d) The $20,000 fee is a cost already incurred that should not be considered in the evaluation of the project
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