Question: Generosity Golf Equipment is considering whether to build a new
Generosity Golf Equipment is considering whether to build a new manufacturing plant in Jacksonville, Florida, in an effort to increase sales of its golf products in the Southeast. If it builds the plant, Generosity would not have to buy land because it owns sufficient land in a good location in Jacksonville. The land on which the plant will be built was bought for $100,000 five years ago; its current value is $800,000. Before it decided that Florida would be a good location for a new plant, Generosity hired a company to provide the demographics of the Jacksonville area. The cost of the study was $200,000. It is estimated that $750,000 of the total sales generated by the new plant will be the result of existing customers shifting their business from other plants because Jacksonville is closer to their locations. How should the amounts mentioned here be considered when Generosity performs its capital budgeting analysis?
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