Suppose that a dam was built at a very high cost. At the time of construction, the estimated cost energy produced by the dam was £10 per unit. Of these £10, £5 contributed to the amortization of the...

Suppose that a dam was built at a very high cost. At the time of construction, the estimated cost energy produced by the dam was £10 per unit. Of these £10, £5 contributed to the amortization of the initial investment and the other £5 to the variable recurrent cost. Now suppose that after the completion of the investment, a new energy source is discovered that allows the production of energy at a cost of £7 per unit. Should the dam be abandoned in favour of the alternative energy source? Please elaborate on your answer.

Extracted text: 5. Suppose that a dam was built at a very high cost. At the time of construction, the estimated cost energy produced by the dam was £10 per unit. Of these £10, £5 contributed to the amortization of the initial investment and the other £5 to the variable recurrent cost. Now suppose that after the completion of the investment, a new energy source is discovered that allows the production of energy at a cost of £7 per unit. Should the dam be abandoned in favour of the alternative energy source? Please elaborate on your answer.