ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 59% chance of success. For $250,000, the manager can conduct a focus group that will increase the probability of success to 65%. Alternatively, the manager can pay a consulting firm $500,000 to research the market and refine the product. The consulting firm successfully launches new products 71% of the time. If the firm successfully launches the widget, the payoff will be $4 million. If the product is a failure, the NPV is $0.

Q 19 Calculate the expected NPV if the managers go directly to the market.

Q20

Based on your analysis, ABC should:

		cannot be determined
		take the product directly to market
		hire the consulting firm
		conduct a focus group