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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 $2 million. If it would cost $4 million to finish development and make the product, you    go ahead and do so. The most you should pay to complete development is million.

Question

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 $2 million. If it would cost $4 million to finish development and make the product, you    go ahead and do so. The most you should pay to complete development is million.

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Step 1

You should not go ahead. The reason is, you will receive greater loss. That is, if you go ahead, the total loss you have to bear is $7 million [5 million + (4-2)]. On the o...

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