Company ABC just developed a new device called U-Pad. If U-Pad is successful, the value of the product when it is brought to market is $34.7 million. If U-Pad fails, the value of the product when it is brought to market is $12.7 million. If U-Pad goes directly to market, there is a 60 percent chance of success. Alternatively, Company ABC can delay the launch by one year and spend $1.37 million today to test market U-Pad. Test marketing would allow the firm to improve the product and increase the probability of success to 90 percent. The appropriate discount rate is 10 percent. What is the NPV of the product if test marketing is conducted before going to market?

A.

$47,400,000

B.

$56,175,545

C.

$28,175,455

D.

$23,700,000