Question

The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a 40 percent chance of success. For $180,000 the manager can conduct a focus group that will increase the product’s chance of success to 55 percent. Alternatively, the manager has the option to pay a consulting firm $395,000 to research the market and refine the product. The consulting firm successfully launches new products 70 percent of the time. If the firm successfully launches the product, the payoff will be $1.95 million. If the product is a failure, the NPV is zero. |

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 number, e.g., 1,234,567.) |

Go to market now:

Focus Group:

Consulting firm:

Answer #1

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The manager for a growing firm is considering the launch of a
new product. If the product goes directly to market, there is a 40
percent chance of success. For $180,000 the manager can conduct a
focus group that will increase the product’s chance of success to
55 percent. Alternatively, the manager has the option to pay a
consulting firm $395,000 to research the market and refine the
product. The consulting firm successfully launches new products 70
percent of 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 $185,000, 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 $400,000 to research the market and refine the
product. The consulting firm successfully launches new products 90
percent of the...

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success. Alternatively, the company can delay the launch by one
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Allied Products, Inc., is considering a new product launch. The
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its economic life.
a.
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Problem 9-6 Decision Trees
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Liberty Products, Inc., is considering a new product launch. The
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Allied Products, Inc., is considering a new product launch. The
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million. Assume that the project has no salvage value at the end of
its economic life.
What is the NPV of the new product? (Enter your answer
in dollars, not millions of dollars, e.g., 1,234,567. Do...

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 $33.2 million. If the HD DVD
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year and spend $1.22 million to test-market the HD...

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 $33 million. If the HD DVD fails,
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Alternatively, the company can delay the launch by one year and
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Ang can delay the launch by one year and spend $1.29 million to
test market the DVDR. Test marketing would allow the...

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