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Omega Company has developed a new gadget. If the gadget is successful, the present value of the payoff ( at the time the product is
Omega 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 $ million. If the gadget fails, the present value of the payoff is $ million. If the gadget goes directly to market, there is a percent chance of success. Alternatively, the company can delay the launch by one year and spend $ million to testmarket the gadget. Testmarketing would allow the firm to improve the gadget and increase the probability of success to The appropriate discount rate is Should the firm conduct testmarketing?
No because NPV is lower by $
No because NPV is lower by $
Yes, because NPV is higher by $
D Yes, because NPV is higher by $
E Yes, because NPV is higher by $
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