Question
ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 60% chance of success.
ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 60% chance of success. For $150,000 the manager can conduct a focus group that will increase the probability of success to 70%. Alternatively, the manager can pay a consulting firm $400,000 to research the market and refine the product. The consulting firm successfully launches new products 75% of the time. If the firm successfully launches the widget, the payoff will be $2 million. If the product is a failure, the NPV is $0.
Calculate the expected NPV if the managers hire the consulting firm.
Based on your analysis, ABC should:
cannot be determined | ||
hire the consulting firm | ||
conduct a focus group | ||
take the product directly to market |
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