Big City Company has developed a new gadget. If the gadget is successful, the present value of the payoff (at the time the product is brought to market) is $6.2 million. If the gadget fails, the present value of the payoff is $1.80 million. If the gadget goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $0.90 million to test-market the product. Test-marketing would allow the company to improve the product and increase the probability of success to 75%. The appropriate discount rate is 11%. Should the firm conduct test-marketing?

No, because NPV is lower by $0.25 million

No, because NPV is lower by approximately $0.31 million

No, because NPV is lower by approximately $0.11 million

Yes, because NPV is higher by approximately $0.34 million

Yes, because NPV is higher by approximately $0.19 million