Question
In: Finance
The manager for a growing firm is considering the launch of a new product. If the...
| The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 60 percent chance of success. For $176,000, the manager can conduct a focus group that will increase the product’s chance of success to 75 percent. Alternatively, the manager has the option to pay a consulting firm $391,000 to research the market and refine the product. The consulting firm successfully launches new products 90 percent of the time. If the firm successfully launches the product, the payoff will be $1.91 million. If the product is a failure, the NPV is $0. |
| Calculate the NPV for each option available for the project. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g. 1,234,567.) |
| Which action should the firm undertake? |
multiple choice
-
Consulting firm
-
Go to market now
-
Focus group
Solutions
Expert Solution
The NPV for each option is calculated and it is found to be
1. Go to market: $ 1,146,000
2. Focus Group: $ 1,256,500
3. Consulting firm: $ 1,328,000
Hence, the firm should pay comsulting firm for product launch.
jeff jeffy answered 2 years agoRelated Solutions
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