Caterpillar Has Spent $5 Million to Date on a New

Multiple Choice

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..