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A is planning on developing a new product. It has a 55% chance of being successful and a 45% chance of failing. Based on the

A is planning on developing a new product. It has a 55% chance of being successful and a 45% chance of failing. Based on the information below, should A test the new product? Show your work.

Successful Test:

Year 1 cost: $1,200,000

Year 2 through 5:

Revenue: $6,000,000

Variable Costs: $2,000,000

Fixed Costs: $1,100,000

Depreciation: $200,000

Tax Rate: 30%

WACC: 10%

Unsuccessful Test:

Year 1 cost: $1,200,000

Year 2 through 5:

Revenue: $3,500,000

Variable Costs: $2,000,000

Fixed Costs: $1,100,000

Depreciation: $200,000

Tax Rate: 30%

WACC: 10%

Based upon the above information, if revenue drops 10%, what is the percentage change in the Net Present Value (NPV)? Show your work.

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