Business Economics for the World Market

The managers of Brand Name Foods are looking at the current business proposition from too narrow of a perspective. The managers are assuming that the only way to analyze the situation is based on cost-benefit that does not consider all possible solutions. The reason the managers of the company think that it is better to give up on the project is because they added up the research and development costs (8 million) and the retrofit production costs (4 million) and then they compared it with the present value of sales (10 million). Based on this analysis the total costs of the project exceed the present value of future sales. It is true that the total costs of the project exceed the present value of future sales, but we have to consider the RD costs were already incurred. If the company were