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2. With the goal and role of financial management in business in mind, determine whether the project should be continued or abandoned. Use the following facts and figures below as your reference.

2. With the goal and role of financial management in business in mind, determine whether the project should be continued or abandoned. Use the following facts and figures below as your reference.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Directions: 1. Read and analyze the given scenario. 2. With the goal and role of financial management in business in mind, determine whether the project should be continued or abandoned. Use the following facts and figures below as your reference. 3. Present your recommendation and explain the reasons in 4-6 sentences. 4. Write your answer on the blanks provided. Company A accepts a project to create a Learning Management System (LMS) for a big client. This company also creates and produces online training materials such as digital videos and ebooks. The LMS project itself has a projected revenue of $850,000. So far, the expenses amounting to $600,000 have been incurred by Company A on the project. This is way beyond the allocated budget. Due to this, the management contemplates on whether the project should still be continued. 1. Customized Software/Program Already purchased for $80,000 (apart from the $600,000 mentioned above), this software cannot be used for any other products of Company A. As the LMS was customized for this particular client, Company A cannot resell this to other customers. 2. Professional Fees These will cost an additional $125,000. The professionals hired for the LMS project are widely skilled in technology and may be tapped to create digital videos and books. If these people will not continue with the LMS project, they may be assigned to create 50 training videos which would be sold at $30,000 each. 3. Project management If the project pushes through, the company will incur an additional cost of $125,000 for professional fees. If not, the hired professionals would be tapped to create digital videos and books. They may be assigned to create 50 training videos which would be sold at $30,000 each
Transcribed Image Text:Directions: 1. Read and analyze the given scenario. 2. With the goal and role of financial management in business in mind, determine whether the project should be continued or abandoned. Use the following facts and figures below as your reference. 3. Present your recommendation and explain the reasons in 4-6 sentences. 4. Write your answer on the blanks provided. Company A accepts a project to create a Learning Management System (LMS) for a big client. This company also creates and produces online training materials such as digital videos and ebooks. The LMS project itself has a projected revenue of $850,000. So far, the expenses amounting to $600,000 have been incurred by Company A on the project. This is way beyond the allocated budget. Due to this, the management contemplates on whether the project should still be continued. 1. Customized Software/Program Already purchased for $80,000 (apart from the $600,000 mentioned above), this software cannot be used for any other products of Company A. As the LMS was customized for this particular client, Company A cannot resell this to other customers. 2. Professional Fees These will cost an additional $125,000. The professionals hired for the LMS project are widely skilled in technology and may be tapped to create digital videos and books. If these people will not continue with the LMS project, they may be assigned to create 50 training videos which would be sold at $30,000 each. 3. Project management If the project pushes through, the company will incur an additional cost of $125,000 for professional fees. If not, the hired professionals would be tapped to create digital videos and books. They may be assigned to create 50 training videos which would be sold at $30,000 each
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