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 $3 million. If it would cost $1 million to finish development and make the product, you should not go ahead and do so. The most you should pay to complete development is $1.0 million.
Required:
a. If it would cost $1 million to finish development and make the product, should you go ahead and do so?
b. What is the most that you should pay to complete development?
Answers: 2
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The company that you manage has invested $5 million in developing a new product, but the development...
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