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The Consumer-Mart Company is going to introduce a new consumer product. If it is brought to market without research about consumer tastes, the firm believes that there is a 60 percent chance that the product will be successful. If successful, the project has a NPV = $518,000. If the product is a failure (40 percent) and withdrawn from the market, then NPV = -$118,000. A consumer survey will cost $64,500 and delay the introduction by one year. With a survey, there is an 80 percent chance of consumer acceptance, in which case the NPV = $518,000. If, on the other hand, the product is a failure (20 percent) and withdrawn from the market, then NPV = -$118,000. The discount rate is 10 percent. By how much does the marketing survey change the expected net present value of the project? Multiple Choice Decreases the NPV by $7,668 Increases the NPV by $27,173 Decreases the NPV by $27,173 Increases the NPV by $10,673

The Consumer-Mart Company is going to introduce a new consumer product. If it is brought to market without research about consumer tastes, the firm believes that there is a 60 percent chance that the product will be successful. If successful, the project has a NPV = $518,000. If the product is a failure (40 percent) and withdrawn from the market, then NPV = -$118,000. A consumer survey will cost $64,500 and delay the introduction by one year. With a survey, there is an 80 percent chance of consumer acceptance, in which case the NPV = $518,000. If, on the other hand, the product is a failure (20 percent) and withdrawn from the market, then NPV = -$118,000. The discount rate is 10 percent. By how much does the marketing survey change the expected net present value of the project? Multiple Choice Decreases the NPV by $7,668 Increases the NPV by $27,173 Decreases the NPV by $27,173 Increases the NPV by $10,673

Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter5: Probability: An Introduction To Modeling Uncertainty
Section: Chapter Questions
Problem 18P: The J.R. Ryland Computer Company is considering a plant expansion to enable the company to begin...
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The Consumer-Mart Company is going to introduce a new consumer product. If it is brought to market without research about consumer tastes, the firm believes that there is a 60 percent chance that the product will be successful. If successful, the project has a NPV = $518,000. If the product is a failure (40 percent) and withdrawn from the market, then NPV =-$118,000. A consumer survey will cost $64,500 and delay the introduction by one year. With a survey, there is an 80 percent chance of consumer acceptance, in which case the NPV = $518,000. If, on the other hand, the product is a failure (20 percent) and withdrawn from the market, then NPV = -$118,000. The discount rate is 10 percent. By how much does the marketing survey change the expected net present value of the project? Multiple Choice O Decreases the NPV by $7,668 Increases the NPV by $27,173 Decreases the NPV by $27,173 Increases the NPV by $10,673
Transcribed Image Text:The Consumer-Mart Company is going to introduce a new consumer product. If it is brought to market without research about consumer tastes, the firm believes that there is a 60 percent chance that the product will be successful. If successful, the project has a NPV = $518,000. If the product is a failure (40 percent) and withdrawn from the market, then NPV =-$118,000. A consumer survey will cost $64,500 and delay the introduction by one year. With a survey, there is an 80 percent chance of consumer acceptance, in which case the NPV = $518,000. If, on the other hand, the product is a failure (20 percent) and withdrawn from the market, then NPV = -$118,000. The discount rate is 10 percent. By how much does the marketing survey change the expected net present value of the project? Multiple Choice O Decreases the NPV by $7,668 Increases the NPV by $27,173 Decreases the NPV by $27,173 Increases the NPV by $10,673
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