[Answer] 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 should you go ahead and do so? What is the most that you should pay to complete the development?

Answer: Yes because the total loss would then be $3 million rather than $5 million. The most you should pay to complete the development would be $2 million.
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 t…

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