Decision Trees Ang Electronics has developed a new wearable ring that continually checks blood pressure during the

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Decision Trees Ang Electronics has developed a new wearable ring that continually checks blood pressure during the day. If the ring is successful, the present value of the payoff (when the product is brought to market) is £20 million. If the ring fails, the present value of the payoff is £5 million. If the product goes directly to market, there is a 50 per cent chance of success. Alternatively, Ang can delay the launch by one year and spend £2 million to test market the ring. Test marketing would allow the firm to improve the product and increase the probability of success to 75 per cent. The appropriate discount rate is 15 per cent. Should the firm conduct test marketing?

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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