Which one of the following should not be included in the analysis of a new product?...
Which one of the following should not be included in the analysis of a new product?
Select one: A. Increase in accounts receivable needed to finance sales of the new product
B. Market value of a machine owned by the firm which will be used to produce the new product
C. Money already spent for research and development of the new product
D. Reduction in sales for a current product once the new product is introduced
E. Increase in accounts payable for inventory purchases of the new product
Homework Answers
Answer - Option C
Answer is Option C. The amount spent in research and development is the "sunk cost". This cost is spent and cannot be recovered, irrespective of whether you go ahead or not with the project.
Rest all the options are cost that are considered in a cash flow analysis of corporate budgeting.
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