Problem: Shamroll inc. is a household products firm that is considering developing a new detergent. In evaluating whether to go ahead with the new detergent project, which of the following statements is most correct?
1) The company will produce the detergent in a building that they already own. The cost of the building is therefore zero and should be excluded from the analysis
2) 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 after-tax income. The $2,000 should be excluded because the equipment can no longer be leased
3) The company will need to hire 10 new workers whose salaries and benefits will total $400,000 per year. Labor costs are not part of capital budgeting and should be excluded.
4) 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.