Dynasty Limited has been involved in a research project (code named DNY) for a number of months. There is some doubt as to whether the project should be completed. If it is, then it is expected that DNY will require another 12 months' work.

The following information relates to the project.

1. Costs incurred to date are £500,000.

2. Sales proceeds if the project continues will be £600,000.

3. Direct material costs amount to £200,000. The type of material required for DNY had already been purchased for another project, and it would cost £20,000 to dispose of it.

4. Direct labour costs have come to £150,000. The direct labour used on DNY is highly skilled and it is not easy to recruit the type of staff required. In order to undertake DNY, some staff would have to be transferred from other projects. This would mean that there was a total loss in contribution from such projects of £350,000.

5. Research staff costs amount to £200,000. The staff would be made redundant at the end of project DNY at a cost of £115,000. If they were to be made redundant now, there would be a cost of £100,000.

6. The company can invest surplus cash at a rate of return of 10 per cent per annum.

7. Non-production overhead budgeted to be apportioned to DNY for the forthcoming 12 months amounts to £60,000.

Required:

Determine whether or not the DNY project should continue.