Question
Laural Inc. is a household products firm that is considering developing a new detergent. In evaluating whether to go ahead with the new detergent project,
Laural Inc. is a household products firm that is considering developing a new detergent. In evaluating whether to go ahead with the new detergent project, which of the following statements is MOST correct?
a. The company will produce the detergent project in a building that they already own. The cost of the building is therefore zero and should be excluded from analysis/
b. The company will need to use some equipment that it could have leased to another company. This equipment lease could have generated $200,000 per year in after-taxincome. The $200,000 should be excluded because the equipment can no longer be leased.
c. The company willneed to hire10 new workers whose salaries and benefits will total $400,000 per year. Laborcosts are not part of capital budgeting and should be excluded.
d. The company will produce the detergent in a building that it renovated 2 years ago for $300,000. The $300,000 should be excluded from analysis.
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