QUESTION 20 1 points Save Answer Luzzo Pharmaceuticals is considering the introd

Question

QUESTION 20 1 points Save Answer Luzzo Pharmaceuticals is considering the introduction of a new recently approved drug. Which of the following is relevant to determining whether take the project? O Luzzo spent $15 million developing the drug. O Luzzo expects the sales of the new product to generate $1 million worth of revenue in 2015. The cost to produce the drug is 5% of sales price O The project will create $250,000 worth of depreciable assets Luzzo's cost of capital for this project is assumed to be 15%. Cliek Save and Submit to save and submit. Cick Save All Ansuers to save al answers. Save All Answers Save and Submit

Explanation / Answer

luzzo already spent 15million which is not reelevant now ,as it is sunk cost now

expected sale cannot be use as relevant cost

cost for produce is 5% of s.p is a relevant but to choose whether to accept or not will need to consider cost of capital also.

hence cost of capital will tells you to accept the project or not

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