Question

Canon (a Japanese company) decided to develop a new digital camcorder. The project costs 30 billion yen. The company's managers expected that the new camcorder would bring 40 billion yen in additional sales. Canon has already invested 10 billion yen when it suddenly finds out that the introduction of a similar camcorder by Panasonic is expected to reduce Canon's additional sales to 18 billion yen. You would advise Canon to:

	Discontinue the project because the total amount of investment it requires is greater than the amount of expected sales
	Finish the project and introduce the new camcorder because the company will still get some revenue from it
	Finish the project, because otherwise the 10 billion yen already invested will be lost
	Discontinue the project because the additional cost of completing it will be greater than the additional revenue
	Finish the project and introduce the new camcorder because the additional revenue from it will be greater than the additional cost

Answer 1

Even after the drop in the sales. the company can expect a total sale of 12 unit and a total cost of $30 million is more than the total revenue that the firm will earn in the market. If the firm invests more they will be facing a bigger loss than they are making right now.

The answer is "A" total investment will be more than the additional sales if the goods and revenue from it.