Gidget has a new widget to bring to market. If the firm goes directly to market with the product, there is a 60% chance of success. However, the firm can conduct customer segment research, which will take a year and cost $5,000,000. By going through research, the company can better target potential customers and increase the probability of success to 75%. If successful, the widget will bring a present value profit (at the time of initial selling) of $90 million. If unsuccessful, the present value profit is only $15 million. The appropriate discount rate is 10%. Calculate the NPV for conducting customer segment research. (Enter whole numbers, e.g. 5 million should be 5,000,000)
Gidget has a new widget to bring to market. If the firm goes directly to market with the product, there is a 60% chance of success. However, the firm can conduct customer segment research, which will take a year and cost $5,000,000. By going through research, the company can better target potential customers and increase the probability of success to 75%. If successful, the widget will bring a present value profit (at the time of initial selling) of $90 million. If unsuccessful, the present value profit is only $15 million. The appropriate discount rate is 10%. Calculate the NPV for conducting customer segment research. (Enter whole numbers, e.g. 5 million should be 5,000,000)
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
Problem 1PS
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Gidget has a new widget to bring to market. If the firm goes directly to market with the product, there is a 60% chance of success. However, the firm can conduct customer segment research, which will take a year and cost $5,000,000. By going through research, the company can better target potential customers and increase the probability of success to 75%. If successful, the widget will bring a
Calculate the NPV for conducting customer segment research. (Enter whole numbers, e.g. 5 million should be 5,000,000)
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