(iv) The initial start-up investment cost (including manufacturing equipment and other fixed sales and marketing costs) for the Dyson Zone project is $100 million. You are conducting a five-year real options analysis wherein there are three equally likely possibilities - high demand (at 100% of the predicted level as per the forecast in Q4(iii) using the Bass model), moderate demand (at 60% of the predicted level) and low demand (at 25% of the predicted level). If there is low demand in the first year, Dyson will pull the product from the market after the first year. All manufacturing equipment would then be sold at a salvage value of $5 million. The contribution margin of Dyson Zone is $100 per unit sold. The time discount rate is 10%.

Dyson's final screen of the new product evaluation process is the company board's policy that start-up investments for a new product payback in 5 years or less. If yes, Dyson would go ahead with launching the new product.

Should Dyson go ahead with Dyson Zone (i.e., is the expected value of the Dyson Zone project over 5 years higher or lower than the startup investment cost)? Show your work.