Side Costs from Projects

In much of the project analyses that we have presented in this chapter, we have assumed that the resources needed for a project are newly acquired; this includes not only the building and the equipment, but also the personnel needed to get the project going. For most businesses considering new projects, this is an unrealistic assumption, however, since many of the resources used on these projects are already part of the business and will just be transferred to the new project. When a business uses such resources, there is the potential for an opportunity cost —

the cost created for the rest of the business as a consequence of this project. This opportunity cost may be a significant portion of the total investment needed on a project.

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