ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 40% chance of success. For $250,000, the manager can conduct a focus group to increase the probability of success to 60%. Alternatively, the manager can pay a consulting firm $4,000,000 to research the market and refine the product. The consulting firm successfully launches new products 80% of the time. If the firm successfully launches the widget, the payoff will be $20 million. If the product is a failure, the NPV is $0. Based on your analysis, ABC should: a. take the product directly to market b. hire the consulting firm c. conduct a focus group
ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 40% chance of success. For $250,000, the manager can conduct a focus group to increase the probability of success to 60%. Alternatively, the manager can pay a consulting firm $4,000,000 to research the market and refine the product. The consulting firm successfully launches new products 80% of the time. If the firm successfully launches the widget, the payoff will be $20 million. If the product is a failure, the NPV is $0. Based on your analysis, ABC should: a. take the product directly to market b. hire the consulting firm c. conduct a focus group
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 40% chance of success. For $250,000, the manager can conduct a focus group to increase the probability of success to 60%. Alternatively, the manager can pay a consulting firm $4,000,000 to research the market and refine the product. The consulting firm successfully launches new products 80% of the time. If the firm successfully launches the widget, the payoff will be $20 million. If the product is a failure, the
Based on your analysis, ABC should:
a. take the product directly to market
b. hire the consulting firm
c. conduct a focus group
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