Which of the following should be included in the analysis of a new product?
I.Money already spent for research and development of the new product
II.Reduction in sales for a current product once the new product is introduced
III.Increase in working capital needed to finance sales of the new product
IV.Interest expense on the loan used to finance the new product launch
A) II and III only
B) II and IV only
C) I, II, and III only
D) II, III, and IV only
E) I, II, III, and IV
F) None of the above.

Question

Quizplus · Accepted Answer

Money already spent (sunk costs) should not be included. Reduction in sales of a current product (cannibalization) and increase in working capital are relevant. Interest expense is typically not included in project analysis as it's part of financing decisions.

Which of the Following Should Be Included in the Analysis