Question
A company's marketing strategy will last two years and produce revenue in years 1 and 2 only. The strategy can result in a success, a
"A company's marketing strategy will last two years and produce revenue in years 1 and 2 only. The strategy can result in a success, a moderate success, or a failure. The marketing strategy will cost $45,000 immediately (year 0), $32,000 in year 1, and $15,000 in year 2. There is uncertainty with projected revenues, but the forecasted revenues and probabilities for the marketing strategy are as follows: - Success: Year 1: $97,000; Year 2: $124,000; Probability: 0.28 - Moderate success: Year 1: $81,000; Year 2: $81,000; Probability: 0.5 - Failure: Year 1: $40,000; Year 2: $62,000; Probability: 0.22 The company's MARR is 13%. You can ignore any other costs except for the marketing costs. Calculate the expected value of the net present worth for the strategy. HINT: it is easier to calculate the net present worth of each separate result first (success, moderate success, failure) before dealing with the probabilities."
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