Caterpillar has spent $5 million to date on a new plant, and another $2 million is needed to complete the plant. When construction was started, it was projected that production at the new plant would add $12 million to Cat's profit, but new projections show the additional profit will be only $6 million. Assuming the incomplete plant is worthless, should Cat complete the new plant or abandon it?
a. Cat should complete the plant because it would create a net profit of $4 million.
b. Cat should complete the plant because it would create a net profit of $1 million.
c. Cat should abandon the plant because a $5 million loss is better than a $7 million loss.
d. Cat should abandon the plant because it would create a net loss of $1 million..
a. Cat should complete the plant because it would create a net profit of $4 million.
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