Question

s a Applications (Ch 01) < Back to Assignment Attempts: 10101□ Average: 0/1 5. Problems and Applications Q5 The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $4.5 million. If it would cost $3 million to finish development and make the product, you go ahead and do so. The most you should pay to complete development is□ million. Grade It Now Save & Continue Continue without saving 2l

Answer 1

You should go ahead

The most you should pay= 4.5 million

5 million has already been invested, so it does not affect the investment decision now. If it continues investing, it will gain 4.5 million in sales which is greater than 1 million cost, so you should do it.

Maximum cost you can bear is the revenue you can generate which is 4.5 million.