1) The Techno Company, a multi-product firm, has developed a new product. Technos CEO estimates that the new product will increase the firms revenues by $5 million per year. She estimates that it will require extra out-of-pocket costs of $4 million per year but after allocating a fair share of the firms fixed General & Administrative costs, the total costs attributed to the new product will be $5.5 million. a. Technos CEO feels that it would not be profitable to introduce this new product. Is she right? Explain why or why not.

b. Technos vice president for research argues that since the development of this product has already cost about $10 million, the firm has little choice but to introduce it. Is his reasoning correct? Explain why or why not.

c. Technos vice president for production argues that instead of launching the new product, the firm would do better by expanding production of one of its existing products. What is the opportunity cost of the VP Productions proposal?