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Repayments of $1000 per month on the 10-year loan taken to finance the warehouse is  ____ cost, which should _____ in the capital budgeting analysis if the project is to use this warehouse as the storage facility.  Group of answer choicesan overhead expense, be includeda financing cost, not be includeda sunk cost, not be includedan opportunity, be included

Question

Repayments of $1000 per month on the 10-year loan taken to finance the warehouse is  ____ cost, which should _____ in the capital budgeting analysis if the project is to use this warehouse as the storage facility.  Group of answer choicesan overhead expense, be includeda financing cost, not be includeda sunk cost, not be includedan opportunity, be included

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Solution

The repayment of a loan taken to finance a warehouse is considered a financing cost. In capital budgeting analysis, financing costs are typically not included. This is because capital budgeting aims to assess the profitability of investment projects based on their cash inflows and outflows, ignoring the financing aspect. Therefore, the correct answer is "a financing cost, not be included".

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