Business, 28.07.2020 19:01 heyrosaphoto3159
B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.14 million. By going through research, the company will be able to better target potential customers and will increase the probability of success to 75 %. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.4 million. If unsuccessful, the present value payoff is only $5.4 million. The appropriate discount rate is 14 %.
1. Calculate the NPV for the firm if it conducts customer segment research, and if it goes to market immediately.
NPV
Market immediately $132000
Research option 122894
2. Should the firm conduct customer segment research or go to the market immediately?
A. Market immediately.
B. Conduct research.
Answers: 2
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B&B has a new baby powder ready to market. If the firm goes directly to the market with the prod...
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