a. Government spendinge b. Investment spending c. Spending on importse d. Consum

Question

a. Government spendinge b. Investment spending c. Spending on importse d. Consumption spending e. Spending on exportsed ed A business has invested $10 million in research that can be used to develop a new product. The research cannot be sold or used in an alternative production process. The cost of further development of the new product is $15 million. That $15 million could be spent to develop 3. an alternative product that will generate $20 million in profits (total revenues minus total costs). Revenues would have to be larger than which of the following to justify a continuation of the development of the new product?4 a. $ 10 million b. $ 15 million c. $ 20 million d. $ 30 million e. some other amount el

Explanation / Answer

There is a profit of $20 million profit over a cost of $15 million which implies that other alternative has a revenue of 20 million + 15 million = $35 million. Hence the current project must have a revenue of more than $35 million ($10 million initially is sunk cost so it is avoided)

Select option E.

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