Given Information:
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 $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.
Step-by-step explanation:
Every product or service that is marketed or is related against, and competitive with, a product or service created or produced by Fiserv or manufactured or distributed. Competitive Product or Service
In the end demand for the product declines due to the exhaustion of supply and economies and new technologies and shifts in the preferences of the customer.
The projected benefit generated by the new product must be offset by the profits from expenses in the project appraisal.