Question
In: Finance
Osceola Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the...
Osceola Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the present value of the payoff (at the time the product is brought to market) is $34.5 million. If the HD DVD fails, the present value of the payoff is $8.6 million. If the product goes directly to market, there is a 60 percent chance of success. Alternatively, Osceola can delay the launch by one year and spend $1.49 million to test-market the HD DVD. Test-marketing would allow the firm to improve the product and increase the probability of success to 80%. The appropriate discount rate is 10%.
What is the NPV of going directly to market? (Round answer to 2 decimal places. Do not round intermediate calculations)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Osceola Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the...
Osceola Electronics, Inc., has developed a new HD DVD. If the HD
DVD is successful, the present value of the payoff (at the time the
product is brought to market) is $29.5 million. If the HD DVD
fails, the present value of the payoff is $7.9 million. If the
product goes directly to market, there is a 60 percent chance of
success. Alternatively, Osceola can delay the launch by one year
and spend $1.14 million to test-market the HD DVD....
Osceola Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the...
Osceola Electronics, Inc., has developed a new HD DVD. If the HD
DVD is successful, the present value of the payoff (at the time the
product is brought to market) is $34 million. If the HD DVD fails,
the present value of the payoff is $6.7 million. If the product
goes directly to market, there is a 60 percent chance of success.
Alternatively, Osceola can delay the launch by one year and spend
$1.24 million to test-market the HD DVD....
Ang Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the...
Ang Electronics, Inc., has developed a new HD DVD. If the HD DVD
is successful, the present value of the payoff (at the time the
product is brought to market) is $34.4 million. If the HD DVD
fails, the present value of the payoff is $12.4 million. If the
product goes directly to market, there is a 60 percent chance of
success. Alternatively, the company can delay the launch by one
year and spend $1.34 million to test-market the HD...
Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value...
Ang Electronics, Inc., has developed a new DVDR. If the DVDR is
successful, the present value of the payoff (when the product is
brought to market) is $34.5 million. If the DVDR fails, the present
value of the payoff is $12.5 million. If the product goes directly
to market, there is a 40 percent chance of success. Alternatively,
Ang can delay the launch by one year and spend $1.35 million to
test market the DVDR. Test marketing would allow the...
A electronics manufacturer has developed a new type of remote control button that is designed to...
A electronics manufacturer has developed a new type of remote
control button that is designed to operate longer before failing to
work consistently. A random sample of 28 of the new buttons is
selected and each is tested in continuous operation until it fails
to work consistently. The resulting lifetimes are found to have a
sample mean of ?¯x¯ = 1254.6 hours and a sample standard deviation
of s = 109.1. Independent tests reveal that the mean lifetime of
the...
A electronics manufacturer has developed a new type of remote control button that is designed to...
A electronics manufacturer has developed a new type of remote
control button that is designed to operate longer before failing to
work consistently. A random sample of 20 of the new buttons is
selected and each is tested in continuous operation until it fails
to work consistently. The resulting lifetimes are found to have a
sample mean of ?¯ = 1260.4 hours and a sample standard deviation of
s = 116.1. Independent tests reveal that the mean lifetime of the...
A successful waffle-man has recently developed a new recipe for waffles. To test the popularity of...
A successful waffle-man has recently developed a new recipe for
waffles. To test the popularity of this new waffle compared to two
other tried-and-true types of waffles, our friend the waffle-man
randomly selected 180 lucky customers to vote on which of the three
waffle types they liked best. Exactly 35% of these customers (or 63
in total) voted in favor of the new waffle. If all waffles were
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would...
Matheson Electronics has just developed a new electronic device that it believes will have broad market...
Matheson Electronics has just developed a new electronic device
that it believes will have broad market appeal. The company has
performed marketing and cost studies that revealed the following
information:
New equipment would have to be acquired to produce the device.
The equipment would cost $180,000 and have a six-year useful life.
After six years, it would have a salvage value of about
$18,000.
Sales in units over the next six years are projected to be as
follows:
Year
Sales...
Matheson Electronics has just developed a new electronic device that it believes will have broad market...
Matheson Electronics has just developed a new electronic device
that it believes will have broad market appeal. The company has
performed marketing and cost studies that revealed the following
information:
New equipment would have to be acquired to produce the device.
The equipment would cost $138,000 and have a six-year useful life.
After six years, it would have a salvage value of about
$24,000.
Sales in units over the next six years are projected to be as
follows:
Year
Sales...
Matheson Electronics has just developed a new electronic device that it believes will have broad market...
Matheson Electronics has just developed a new electronic device
that it believes will have broad market appeal. The company has
performed marketing and cost studies that revealed the following
information:
a. New equipment would have to be acquired to produce the
device. The equipment would cost $1,182,000 and have a six-year
useful life. After six years, it would have a salvage value of
about $18,000.
b. Sales in units over the next six years are projected to be as
follows:...
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