Homework Answers
Since, it would cost $ 3 million to finish the development and make the product, I will go ahead and do so.
If I will quit at this stage will lose $5 million. However, if I pay $ 3 million, I could gin back $ 4.5 million. Therefore, total loss is
$ 4.5 million - $ 5 million = - $ 0.5 million
I would pay no more than $ 4.5 million to finish and make the new product. Because if I pay $ 4.5 million to finish, I could lose $ 5 million just as much as loss of quitting the development.
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