company was nearing the completion of a home for Jan and Bill Kennedy when the couple suddenly declared bankruptcy. At that time, SDC had invested $1,525,000 in the project.

The firm can sell the uncompleted residence “as is” to a new buyer for $1,400,000, or it can invest another $160,000 to finish the project and sell it on the open market for $1,600,000.

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Required

a. What is true about the original $1,525,000 investment from a decision-making perspective? S y NvS

b. Which of the following options—do nothing, sell “as is” at $1,400,000, or sell “finished” at ie Va

$1,600,000—should SDC pursue? Why? S/2