Your firm spends $1 million researching a real estate project. The result determines that the construction and permits will cost $50 million. Revenues will be $10 million per year, with expenses of $2 million per year. It will last for 20 years, and then you will sell it for $5 million. It will require net working capital of $50,000 for parts and a petty cash account. It can be funded with a loan at LIBOR+2%. LIBOR is currently 1.2%. Your firms cost of capital is usually 8%. Assume you wont pay any taxes. Should the $1 million spent on research be factored into the cost-benefit analysis of the project?

• A. Yes
• B. No