Question

A corporation began construction on a new site 2 years ago. At that time mgrs predicted the new plant would generate over $5 million in sales, however, now a more conservative estimate shows that the new plant will only generate an additional $3 million in sales. Over the past two years the corp. has spendt $4 million on construction of the new site. Another $2 million is needed to complete the facility. Should the mgrs scrap the project or move forward. Explain your answer....Instructions said not to include sunk costs in determining your answer..I am lost!

Answer 1

I think they should move forward with the project.

If you don't include costs already expended it is still cost effective and they should still show a profit