Ontel Engineers Proposed Developing a 10-Gigahertz Microprocessor in Early 2011

question 11

Multiple Choice

Ontel engineers proposed developing a 10-Gigahertz microprocessor in early 2011 at a cost of $20 million for a working prototype.By mid-2012,the $20 million had been spent with no prototype.The engineers request an additional $10 million to finish the project.For convenience,assume the marginal cost of producing the chip once it is developed is zero.
-If the expected revenues of a 10-Gigahertz chip are $15 million,Ontel should

• A) stop development and take a $20 million loss.
• B) finish development and earn a $5 million profit.
• C) stop development to avoid a $10 million loss.
• D) finish development and earn a $5 million loss.
• E) finish development and take a $15 million loss.

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Definitions:

Unemployment Tax

Taxes paid by employers to fund unemployment insurance programs, offering temporary financial assistance to unemployed workers.