could you check if it\'s correct please... should/should not and how much to pay

Question

could you check if it's correct please... should/should not and how much to pay to complete

·MIN DTAP Assessment 1 Spring 2018 at 11:59 PM EST Due on T Back to Attempts: | | Score: /10 4. Problems and Applications Q5 you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent report that the introduction of competing products has reduced the expected sales of your new product to $1.5 million. If it would cost $2 million to finish development an d make the product, you should go ahead and do so. The most you should pay to complete development is $5.5 million Continue without saving

Explanation / Answer

The company should not go ahead and do so. This is because 5 million is a "sunk cost" which cannot be recovered. Further, since the value has reduced to mere 1.5 million, and it more 2 million are needed to complete the project, then the development of the project is a loss making proposition. Thus, the most that should be paid to complete the project should be 1.5 million, and not 2 million .

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