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8. Decision Trees B&B has a new baby powder ready to market. If the firm goes directly to market with the product, there is only
8. Decision Trees B&B has a new baby powder ready to market. If the firm goes directly to market with the product, there is only a 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $875,000. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $16.5 million. If unsuccessful, the present value payoff is $7.5 million. Should the firm conduct customer segment research or go directly to market? The appropriate discount rate is 13 percent
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