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 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. 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?
Solutions
Expert Solution
Solution :
The NPV of going directly to market = $ 23,080,000.00
The NPV of the Test Marketing Option = $ 24,705,454.55
Since the NPV of the Test Marketing Option is higher the company should go for the Test Marketing Option.
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 1 year 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 $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....
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....
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
equally tasty, then the waffle-man knows to expect that each waffle
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:...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- R language create file Ass2.txt "("Macauley, Culkin" "Antoine, Doinel" "Ace, Ventura" "Tommy, DeVito" "Oda Mae, Brown"...
- Matheson Electronics has just developed a new electronic device that it believes will have broad market...
- Using Python Define a Student class. A Student class needs to have two attributes, the student_name...
- Assume Highline Company has just paid an annual dividend of $0.92. Analysts are predicting an 10.2%...
- Before you begin your program: Create a text file in your project folder with 20 "quirky...
- Write a function matrix_power(A, n) that computes the power An using Boolean arithmetic and returns the...
- leo's marx perpective on progess
ADVERTISEMENT