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April 20, 2014

Homework Help: finance

Posted by savin1 on Saturday, April 16, 2011 at 2:11pm.

Shamroll inc. is a household products frim that is considering developing a new detergent. In evaluationg whether to go ahead with the new detergent project, which of the following statements is most correct?

A) The company will produce the detergent in a building that they already own. The cost of the building is therefore zero and should be exluded from the 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 afte-tax income. THe $2,000 should be excluded because the equipment can no longer be leased

C) The company will need to hire 10 new workers whose salaries and benefits will total $400,000 per year. Labor costs are nt part of capital budgeting and should be excluded.

D) The company will produce the detergent in a building that is renovated 2 years ago for $300,000. The $300,000 should be excluded from the analysis.

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